As filed with the Securities and Exchange Commission on March 1, 2004
1933 Act Registration No. 2-25469
1940 Act Registration No. 811-1424
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.__
Post-Effective Amendment No. 79 [X]
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and/or
REGISTRATION STATEMENT UNDER THE [X]
INVESTMENT COMPANY ACT OF 1940
Amendment No. 79 [X]
(Check appropriate box or boxes.)
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Registrant's Telephone Number, including Area Code (713) 626-1919
Robert H. Graham
Copy to:
Lisa A. Moss, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
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It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on April 30, 2004 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION--DATED MARCH 1, 2004
AIM AGGRESSIVE GROWTH FUND
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM LARGE CAP BASIC VALUE FUND
AIM LARGE CAP GROWTH FUND
AIM MID CAP GROWTH FUND
AIM WEINGARTEN FUND
PROSPECTUS
APRIL 30, 2004
Institutional Classes
AIM Aggressive Growth Fund seeks to provide long-term growth of capital.
AIM Blue Chip Fund seeks to provide long-term growth of capital and, secondarily, current income.
AIM Capital Development Fund seeks to provide long-term growth of capital.
AIM Charter Fund seeks to provide growth of capital.
AIM Constellation Fund seeks to provide growth of capital.
AIM Large Cap Basic Value Fund seeks to provide long-term growth of capital with a secondary objective of current income.
AIM Large Cap Growth Fund seeks to provide long-term growth of capital.
AIM Mid Cap Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information about the Institutional Class shares of the funds. Please read it before investing and keep it for future reference.
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
An investment in a fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
INVESTMENT OBJECTIVES AND STRATEGIES 1 ------------------------------------------------------ AIM Aggressive Growth Fund 1 AIM Blue Chip Fund 1 AIM Capital Development Fund 1 AIM Charter Fund 1 AIM Constellation Fund 2 AIM Large Cap Basic Value Fund 2 AIM Large Cap Growth Fund 2 AIM Mid Cap Growth Fund 2 AIM Weingarten Fund 3 PRINCIPAL RISKS OF INVESTING IN THE FUNDS 3 ------------------------------------------------------ PERFORMANCE INFORMATION 5 ------------------------------------------------------ Annual Total Returns 5 Performance Table 10 FEE TABLE AND EXPENSE EXAMPLE 14 ------------------------------------------------------ Fee Table 14 Expense Example 15 FUND MANAGEMENT 16 ------------------------------------------------------ The Advisors 16 Advisor Compensation 16 Portfolio Managers 16 OTHER INFORMATION 18 ------------------------------------------------------ Dividends and Distributions 18 Suitability for Investors 18 Future Fund Closure 18 FINANCIAL HIGHLIGHTS 19 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Purchasing Shares A-1 Redeeming Shares A-2 Pricing of Shares A-2 Taxes A-2 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. are service marks of A I M Management Group Inc. AIM Trimark is a servicemark of A I M Management Group Inc. and AIM Funds Management Inc.
No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations.
AIM AGGRESSIVE GROWTH FUND (AGGRESSIVE GROWTH)
The fund's investment objective is to achieve long-term growth of capital. The
investment objective of the fund may be changed by the Board of Trustees
without shareholder approval.
The fund seeks to meet its objective by investing primarily in common stocks of companies whose earnings the fund's portfolio managers expect to grow more than 15% per year. The fund will invest in securities of small- and medium-sized growth companies. The portfolio managers focus on companies they believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
AIM BLUE CHIP FUND (BLUE CHIP)
The fund's primary investment objective is long-term growth of capital with a secondary objective of current income. The investment objectives of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objectives by investing, normally, at least 80% of its assets, in securities of blue chip companies. In complying with this 80% investment requirement, the fund may invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers blue chip companies to be large and medium sized companies (i.e., companies with market capitalizations, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark--Index during the most recent 11-month period, based on month-end data, plus the most recent data during the current month) with leading market positions and which possess the following characteristics:
- MARKET CHARACTERISTICS--Companies that occupy (or in AIM's judgment have the potential to occupy) leading market positions that are expected to be maintained or enhanced over time. Strong market positions, particularly in growing industries, can give a company pricing flexibility as well as the potential for strong unit sales. These factors can, in turn, lead to higher earnings growth and greater share price appreciation. Market leaders can be identified within an industry as those companies that have (i) superior growth prospects compared with other companies in the same industry; (ii) possession of proprietary technology with the potential to bring about major changes within an industry; and/or (iii) leading sales within an industry, or the potential to become a market leader.
- FINANCIAL CHARACTERISTICS--Companies that possess at least one of the
following attributes (i) faster earnings growth than its competitors and the
market in general; (ii) higher profit margins relative to its competitors;
(iii) strong cash flow relative to its competitors; and/or (iv) a balance
sheet with relatively low debt and a high return on equity relative to its
competitors.
The portfolio managers consider whether to sell a particular security when they believe the issuer of the security no longer is a market leader, and/or it no longer has the characteristics described above. When the portfolio managers believe securities other than marketable equity securities offer the opportunity for long-term growth of capital and current income, the fund may invest in United States government securities and high-quality debt securities.
AIM CAPITAL DEVELOPMENT FUND (CAPITAL DEVELOPMENT)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing primarily in securities, including common stocks, convertible securities and bonds, of small- and medium-sized companies. Among factors which the portfolio managers may consider when purchasing these securities are (1) the growth prospects for a company's products; (2) the economic outlook for its industry; (3) a company's new product development; (4) its operating management capabilities; (5) the relationship between the price of the security and its estimated fundamental value; (6) relevant market, economic and political environments; and (7) financial characteristics, such as balance sheet analysis and return on assets. The portfolio managers consider whether to sell a particular security when any one of these factors materially changes or when the securities are no longer considered medium-sized company securities.
AIM CHARTER FUND (CHARTER)
The fund's investment objective is growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing at least 65% of its total assets in securities of established companies that have long-term above-average growth in earnings and growth companies that the portfolio managers believe have the potential for above-average growth in earnings. In selecting investments, the portfolio managers seek to identify those companies that are, in their view, undervalued relative to current or projected earnings, or the current market value of assets owned by the company. The primary emphasis of the portfolio managers' search for undervalued equity securities is in four categories: (1) out-of-favor cyclical growth companies; (2) established growth companies that are undervalued compared to historical relative valuation parameters; (3) companies where there is early but tangible evidence of improving prospects which are not yet reflected in the value of the companies' equity securities; and (4) companies whose equity securities are selling at prices that do not yet reflect the current market value of their assets. The portfolio managers consider whether to sell a particular security when any of these factors materially changes. For risk management or cash management purposes, the fund may hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market
funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase. A larger position in cash or cash equivalents could detract from achieving the fund's objective, but could also reduce the fund's exposure in the event of a market downturn.
AIM CONSTELLATION FUND (CONSTELLATION)
The fund's investment objective is growth of capital. The investment objective
of the fund may be changed by the Board of Trustees without shareholder
approval.
The fund seeks to meet its objective by investing principally in common stocks of companies the portfolio managers believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when it no longer meets these criteria. The fund will invest without regard to market capitalization.
AIM LARGE CAP BASIC VALUE FUND (LARGE CAP BASIC VALUE)
The fund's primary investment objective is long-term growth of capital with a secondary objective of current income. The investment objectives of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objectives by investing, normally, at least 80% of its assets in securities of large-capitalization companies that offer potential for capital growth, and may offer potential for current income. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a large-capitalization company if it has a market capitalization, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 1000 Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The fund may also invest in debt instruments that are consistent with its investment objectives of long-term growth of capital and current income.
The portfolio managers purchase securities of companies that they believe have the potential for above-average growth in revenues and earnings and that they believe are undervalued in relation to long-term earning power or other factors. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
AIM LARGE CAP GROWTH FUND (LARGE CAP GROWTH)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of large-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a large-capitalization company if it has a market capitalization, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 1000 Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
The fund's portfolio managers may focus on securities of companies with market capitalizations that are within the top 50% of stocks in the Russell 1000 Index at the time of purchase. The portfolio managers purchase securities of a limited number of large-cap companies that they believe have the potential for above-average growth in revenues and earnings. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
AIM MID CAP GROWTH FUND (MID CAP GROWTH)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of mid-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell MidCap--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell MidCap Index measures the performance of the 800 companies with the lowest market capitalization in the Russell 1000--Registered Trademark-- Index. The Russell 1000 Index is a widely recognized, unmanaged index of common
stocks of the 1000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3000 largest U.S. companies based on total market capitalization. These companies are considered representative of medium-sized companies. Under normal conditions, the top 10 holdings may comprise up to 40% of the fund's total assets.
The portfolio managers focus on companies they believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have favorable prospects for future growth. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
AIM WEINGARTEN FUND (WEINGARTEN)
The fund's investment objective is to provide growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund will invest primarily in common stocks of seasoned and better-capitalized companies. The portfolio managers focus on companies that have experienced above-average growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
CAPITAL DEVELOPMENT, LARGE CAP GROWTH, MID CAP GROWTH AND WEINGARTEN
Each fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives. If a fund does trade in this way, it may incur increased transaction costs and brokerage commissions, both of which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
ALL FUNDS
Each of Aggressive Growth, Blue Chip, Capital Development, Large Cap Basic Value, Large Cap Growth and Mid Cap Growth may invest up to 25% of its total assets in foreign securities. Each of Charter, Constellation and Weingarten may invest up to 20% of its total assets in foreign securities. For cash management purposes, the funds may also hold a portion of their assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of a fund are applied at the time of purchase.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the funds may temporarily hold all or a portion of their assets in cash, cash equivalents or high-quality debt instruments. As a result, a fund may not achieve its investment objective.
ALL FUNDS
There is a risk that you could lose all or a portion of your investment in the funds. The value of your investment in a fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
An investment in the funds is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
BLUE CHIP
The income you may receive from your investment in Blue Chip may vary.
AGGRESSIVE GROWTH, CAPITAL DEVELOPMENT, CONSTELLATION AND MID CAP GROWTH
The fluctuation in the value of your investment is especially true with respect to equity securities of smaller companies, whose prices may go up and down more than equity securities of larger, more-established companies. Also, since equity securities of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
CHARTER
To the extent the fund holds cash or cash equivalents rather than equity securities for risk management purposes, the fund may not achieve its investment objective.
LARGE CAP BASIC VALUE
Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. When interest rates rise, bond prices fall; the longer a bond's duration, the more sensitive it is to this risk.
LARGE CAP BASIC VALUE AND MID CAP GROWTH
Since a large percentage of each fund's assets will be invested in a limited number of securities, any change in value of those securities could significantly affect the value of your investment in the funds.
Each fund may participate in the initial public offering (IPO) market in some market cycles. Because of each fund's small asset
base, any investment a fund may make in IPOs may significantly affect the fund's total return. As each fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on each fund's total return.
LARGE CAP BASIC VALUE, LARGE CAP GROWTH AND MID CAP GROWTH
The values of the convertible securities in which the funds may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the funds.
The bar charts and tables shown below provide an indication of the risks of investing in each of the funds. A fund's past performance (before and after taxes) is not necessarily an indication of its future performance. The returns shown for Large Cap Basic Value, Large Cap Growth and Mid Cap Growth are those of each fund's Class A shares, which are not offered in this prospectus. Institutional Class shares would have higher annual returns because, although the shares are invested in the same portfolio of securities, Institutional Class shares have lower expenses. As of the date of this prospectus, the Institutional Classes of Large Cap Basic Value, Large Cap Growth and Mid Cap Growth have not yet commenced operations.
The following bar charts show changes in the performance of Large Cap Basic Value's, Large Cap Growth's and Mid Cap Growth's Class A shares and Aggressive Growth's, Blue Chip's, Capital Development's, Charter's, Constellation's and Weingarten's Institutional Class shares from year to year. The bar charts do not reflect sales loads. If they did, the annual returns shown would be lower. Institutional Class shares are not subject to front-end or back-end sales loads.
AGGRESSIVE GROWTH--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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2003................................................................... 27.89%
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BLUE CHIP--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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2003................................................................... 26.14%
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CAPITAL DEVELOPMENT--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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2003................................................................... 36.09%
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CHARTER--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1994................................................................... -3.84%
1995................................................................... 36.13%
1996................................................................... 20.29%
1997................................................................... 25.18%
1998................................................................... 27.40%
1999................................................................... 34.37%
2000................................................................... -14.37%
2001................................................................... -22.67%
2002................................................................... -15.81%
2003................................................................... 24.64%
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CONSTELLATION--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1994................................................................... 1.80%
1995................................................................... 36.16%
1996................................................................... 16.83%
1997................................................................... 13.45%
1998................................................................... 19.41%
1999................................................................... 45.07%
2000................................................................... -9.98%
2001................................................................... -23.22%
2002................................................................... -24.37%
2003................................................................... 29.98%
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LARGE CAP BASIC VALUE--CLASS A
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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2000................................................................... 21.74%
2001................................................................... 1.25%
2002................................................................... -23.20%
2003................................................................... 32.02%
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LARGE CAP GROWTH--CLASS A
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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2000................................................................... 8.52%
2001................................................................... -36.13%
2002................................................................... -26.46%
2003................................................................... 29.32%
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MID CAP GROWTH--CLASS A
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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2000................................................................... -10.12%
2001................................................................... -21.21%
2002................................................................... -31.86%
2003................................................................... 42.08%
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WEINGARTEN--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1994................................................................... 0.13%
1995................................................................... 35.43%
1996................................................................... 18.24%
1997................................................................... 26.48%
1998................................................................... 33.58%
1999................................................................... 35.23%
2000................................................................... -19.98%
2001................................................................... -33.70%
2002................................................................... -31.10%
2003................................................................... 31.61%
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During the periods shown in the bar charts, the highest quarterly returns and the lowest quarterly returns were as follows:
HIGHEST QUARTERLY RETURN LOWEST QUARTERLY RETURN
FUND (QUARTER ENDED) (QUARTER ENDED)
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Aggressive 12.96% (6/30/03) (3.40)% (3/31/03)
Growth--Institutional
Class
Blue Chip--Institutional 12.98% (6/30/03) (1.45)% (3/31/03)
Class
Capital 17.32% (6/30/03) (2.15)% (3/31/03)
Development--Institutional
Class
Charter--Institutional 26.29% (12/31/98) (21.63)% (09/30/01)
Class
Constellation-- 36.71% (12/31/99) (23.20)% (09/30/01)
Institutional Class
Large Cap Basic 20.48% (06/30/03) (20.22)% (09/30/02)
Value--Class A
Large Cap Growth--Class A 26.64% (03/31/00) (34.26)% (03/31/01)
Mid Cap Growth--Class A 28.02% (03/31/00) (30.93)% (09/30/01)
Weingarten--Institutional 28.14% (12/31/98) (27.56)% (03/31/01)
Class
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PERFORMANCE TABLE(1)
The following performance table compares each fund's performance to that of a broad-based securities market index, a style specific index, and a peer group index. Large Cap Basic Value's, Large Cap Growth's and Mid Cap Growth's performance reflects payment of sales loads. The indices do not reflect payment of fees, expenses or taxes. The funds are not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the funds may deviate significantly from the performance of the indices shown below.
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2003) 1 YEAR 5 YEARS 10 YEARS INCEPTION(2) DATE
-------------------------------------------------------------------------------------
Aggressive
Growth--Institutional Class 03/15/02
Return Before Taxes 27.89% N/A N/A (0.76)%
Return After Taxes on
Distributions 27.89 N/A N/A (0.76)
Return After Taxes on
Distributions and Sale of
Fund Shares 18.13 N/A N/A (0.65)
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S&P 500 Index(3,4) 28.67 N/A N/A 2.02(24) 02/28/02(24)
Russell 2500(TM) Index(5) 45.51 N/A N/A 12.09(24) 02/28/02(24)
Russell 2500--Registered
Trademark-- Growth Index(6) 46.31 N/A N/A 8.18(24) 02/28/02(24)
Lipper Mid Cap Growth Fund
Index(7) 35.42 N/A N/A 3.22(24) 02/28/02(24)
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Blue Chip--Institutional Class 03/15/02
Return Before Taxes 26.14 N/A N/A (3.68)
Return After Taxes on
Distributions 26.14 N/A N/A (3.68)
Return After Taxes on
Distributions and Sale of
Fund Shares 16.99 N/A N/A (3.12)
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S&P 500 Index(3,)(8) 28.67 N/A N/A 2.02(24) 02/28/02(24)
Russell 1000--Registered
Trademark-- Index(9) 29.89 N/A N/A 2.79(24) 02/28/02(24)
Lipper Large Cap Core Fund
Index(10) 24.80 N/A N/A 0.86(24) 02/28/02(24)
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Capital
Development--Institutional
Class 03/15/02
Return Before Taxes 36.09 N/A N/A 1.59
Return After Taxes on
Distributions 35.60 N/A N/A 1.39
Return After Taxes on
Distributions and Sale of
Fund Shares 24.09 N/A N/A 1.34
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S&P 500 Index(3,11) 28.67 N/A N/A 2.02(24) 02/28/02(24)
Russell 2500(TM) Index(5) 45.51 N/A N/A 12.09(24) 02/28/02(24)
Russell Midcap(TM) Index(12) 40.06 N/A N/A 10.14(24) 02/28/02(24)
Lipper Mid Cap Core Fund
Index(13) 36.58 N/A N/A 8.52(24) 02/28/02(24)
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Charter--Institutional Class
Return Before Taxes 24.64 (1.37)% 8.89% -- 07/30/91
Return After Taxes on
Distributions 24.50 (2.03) 7.01 --
Return After Taxes on
Distributions and Sale of
Fund Shares 16.18 (1.33) 6.75 --
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S&P 500 Index(14) 28.67 (0.57) 11.06 --
Russell 1000--Registered
Trademark-- Index(9) 29.89 (0.13) 11.00 --
Lipper Large Cap Core Fund
Index(10) 24.80 (1.08) 9.27 --
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AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2003) 1 YEAR 5 YEARS 10 YEARS INCEPTION(2) DATE
-------------------------------------------------------------------------------------
Constellation--Institutional
Class 04/08/92
Return Before Taxes 29.98% (0.29)% 8.02% --
Return After Taxes on
Distributions 29.98 (1.38) 6.88 --
Return After Taxes on
Distributions and Sale of
Fund Shares 19.49 (0.29) 6.78 --
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S&P 500 Index(14) 28.67 (0.57) 11.06 --
Russell 1000--Registered
Trademark-- Growth Index(15) 29.75 (5.11) 9.21 --
Lipper Multi Cap Growth Fund
Index(16) 35.38 (1.76) 7.96 --
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Large Cap Basic Value--Class A 06/30/99
Return Before Taxes 24.70% N/A N/A 4.36%
Return After Taxes on
Distributions 24.70 N/A N/A 4.04
Return After Taxes on
Distributions and Sales
of Fund Shares 16.05 N/A N/A 3.52
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S&P 500 Index(3,17) 28.67 N/A N/A (3.17)(24) 06/30/99(24)
Russell 1000--Registered
Trademark-- Index(9) 29.89 N/A N/A (2.54)(24) 06/30/99(24)
Russell 1000--Registered
Trademark-- Value Index(18) 30.03 N/A N/A 1.21(24) 06/30/99(24)
Lipper Large Cap Value Fund
Index(19) 28.00 N/A N/A (1.03)(24) 06/30/99(24)
-------------------------------------------------------------------------------------
Large Cap Growth Fund--Class A 03/01/99
Return Before Taxes 22.22% N/A N/A (2.87)%
Return After Taxes on
Distributions 22.22 N/A N/A (2.87)
Return After Taxes on
Distributions and Sale of
Fund Shares 14.44 N/A N/A (2.42)
-------------------------------------------------------------------------------------
S&P 500 Index(14) 28.67 N/A N/A (0.78)(24) 02/28/99(24)
Russell 1000--Registered
Trademark-- Growth Index(15) 29.75 N/A N/A (5.49)(24) 02/28/99(24)
Lipper Large Cap Growth Fund
Index(23) 26.96 N/A N/A (6.12)(24) 02/28/99(24)
-------------------------------------------------------------------------------------
Mid Cap Growth Fund--Class A 11/01/99
Return Before Taxes 34.19% N/A N/A (2.75)%
Return After Taxes on
Distributions 34.19 N/A N/A (2.75)
Return After Taxes on
Distributions and Sale of
Fund Shares 22.22 N/A N/A (2.32)
-------------------------------------------------------------------------------------
S&P 500 Index(3,20) 28.67 N/A N/A (3.35)(24) 10/31/99(24)
S&P MidCap 400 Index(21) 35.62 N/A N/A 10.39(24) 10/31/99(24)
Russell Midcap--Trademark--
Growth Index(22) 42.71 N/A N/A (1.34)(24) 10/31/99(24)
Lipper Mid Cap Growth Fund
Index(7) 35.42 N/A N/A (3.23)(24) 10/31/99(24)
-------------------------------------------------------------------------------------
|
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2003) 1 YEAR 5 YEARS 10 YEARS INCEPTION(2) DATE
-------------------------------------------------------------------------------------
Weingarten--Institutional
Class 10/08/91
Return Before Taxes 31.61 (8.24) 5.83 --
Return After Taxes on
Distributions 31.61 (9.18) 3.46 --
Return After Taxes on
Distributions and Sale of
Fund Shares 20.55 (6.68) 4.19 --
-------------------------------------------------------------------------------------
S&P 500 Index(14) 28.67 (0.57) 11.06 --
Russell 1000--Registered
Trademark-- Growth Index(15) 29.75 (5.11) 9.21 --
Lipper Large Cap Growth Fund
Index(23) 26.96 (5.53) 7.77 --
-------------------------------------------------------------------------------------
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
(1) A significant portion of Large Cap Basic Value's and Large Cap Growth's returns during certain periods prior to 2001 was attributable to its investments in IPOs. These investments had a magnified impact when each fund's asset base was relatively small. As each fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on each fund's total return. For additional information regarding the impact of IPO investments on each fund's performance, please see the "Financial Highlights" section of this prospectus.
(2) Since Inception performance is only provided for a class with less than ten calendar years of performance.
(3) The Standard & Poor's 500 Index measures the performance of the 500 most widely held common stock and is considered one of the best indicators of U.S. stock market performance. Each of Aggressive Growth, Blue Chip, Capital Development, Large Cap Basic Value and Mid Cap Growth has elected to use the S&P 500 Index as its broad-based index rather than the Russell 2500(TM) Index, Russell 1000(R) Index, Russell 2500(TM) Index, Russell 1000--Registered Trademark-- Index and Standard & Poors Midcap 400 Index, respectively, because the S&P 500 Index is a more widely recognized gauge of U.S. stock market performance.
(4) The fund has also included the Russell 2500--Registered Trademark-- Growth Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Mid Cap Growth Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(5) The Russell 2500(TM) Index measures the performance of the 2,500 smallest companies in the Russell 3000(TM) Index and represents approximately 16% of the total market capitalization of the Russell 3000(TM) Index. The Russell 3000(TM) Index measures the performance of the 3,000 largest U.S. companies and is regarded as the standard for measuring the U.S. stock market.
(6) The Russell 2500(TM) Growth Index measures the performance of those Russell 2500 Index companies with higher price-to-book ratios and higher forecasted growth values.
(7) The Lipper Mid Cap Growth Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Mid Cap Growth category. These funds typically invest in stocks with market capitalizations between $1 and $5 billion at the time of purchase and have an above-average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the S&P MidCap 400 Index.
(8) In addition, the Lipper Large Cap Core Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(9) The Russell 1000--Registered Trademark-- Index measures the performance of the 1,000 largest companies domiciled in the United States.
(10) The Lipper Large Cap Core Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large Cap Core category. These funds typically invest in stocks with market capitalizations greater than $5 billion at the time of purchase and have an average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-growth value, compared to the S&P 500 Index.
(11) The fund has also included the Russell Midcap(TM) Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Mid Cap Core Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(12) The Russell Midcap(TM) Index measures the performance of the 800 smallest companies in the Russell 1000(R) Index. These stocks represent approximately 25% and the total market capitalization of the Russell 1000(R) Index. The Russell 1000--Registered Trademark-- Index measures the performance of the 1,000 largest companies domiciled in the United States.
(13) The Lipper Mid Cap Core Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Mid Cap Core category. These funds typically invest in stocks with market capitalizations between $1 and $5 billion at the time of purchase and have an average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the S&P MidCap 400 Index.
(14) The S&P 500 Index measures the performance of the 500 most widely held common stock and is considered one of the best indicators of U.S. stock market performance. Each of Charter, Constellation, Large Cap Growth and Weingarten has also included the Russell 1000(R) Index, Russell 1000(R) Growth Index, Russell 1000--Registered Trademark-- Growth Index and Russell 1000(R) Growth Index, respectively, which each fund believes more closely reflects the performance of the types of securities in which it invests. In addition, the Lipper Large Cap Core Fund Index, Lipper Multi Cap Growth Fund Index and Lipper Large Cap Growth Fund Index, respectively, (which may or may not include the fund) is included for comparison to a peer group.
(15) The Russell 1000--Registered Trademark-- Growth Index measures the performance of those securities in the Russell 1000--Registered Trademark-- Index with a higher than average growth forecast.
(16) The Lipper Multi Cap Growth Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Multi Cap Growth category. These funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. The S&P SuperComposite 1500 Index is considered representative of the U.S. equity markets.
(17) The fund has also included the Russell 1000--Registered Trademark-- Value Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Large Cap Value Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(18) The Russell 1000--Registered Trademark-- Value Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with lower price-to-book ratios and lower forecasted growth values.
(19) The Lipper Large Cap Value Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large Cap Value category. These funds typically invest in stocks with market capitalizations greater than $5 billion at the time of purchase and have a below-average price-to-earnings ratio, price-to-book ratio and a three year sales-per-share growth value, compared to the S&P 500 Index.
(20) The fund has also included the Russell Midcap--Trademark-- Growth Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Mid Cap Growth Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(21) The Standard & Poor's MidCap 400 Index measures the performance of 400 domestic midcap companies and is a benchmark of midcap stock price movement in the U.S.
(22) The Russell Midcap--Trademark-- Growth Index measures the performance of those securities in the Russell Midcap--Trademark-- Index with a higher than average growth forecast. The Russell Midcap--Trademark--Index measures the performance of the 800 smallest companies in the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- Index measures the performance of the 1,000 largest companies domiciled in the United States.
(23) The Lipper Large Cap Growth Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large Cap Growth category. These funds typically invest in stocks with market capitalization greater than $5 billion at the time of the purchase and have an above-average price-to-earnings ratio, price to book ratio, and a three year sales-per-share growth value, compared to the S&P 500 Index.
(24) The average annual total return given is since the month end closest to the inception date of the fund.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold Institutional Class shares of the funds.
SHAREHOLDER FEES ---------------------------------------------------------------------------------------------------------------------------- (fees paid directly from AGGRESSIVE BLUE CAPITAL LARGE CAP LARGE CAP your investment) GROWTH CHIP DEVELOPMENT CHARTER CONSTELLATION BASIC VALUE GROWTH ---------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None None None None None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None None None None None None None ---------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES ------------------------------------------------------------- (fees paid directly from MID CAP your investment) GROWTH WEINGARTEN ------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None None ------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(1) -------------------------------------------------------------------------------------------------- (expenses that are deducted AGGRESSIVE BLUE CAPITAL from fund assets) GROWTH CHIP DEVELOPMENT CHARTER CONSTELLATION -------------------------------------------------------------------------------------------------- Management Fees 0.64% 0.64% 0.67% 0.63% 0.63% Distribution and/or Service (12b-1) Fees None None None None None Other Expenses() 0.07 0.13 0.58 0.16 0.13 Total Annual Fund Operating Expenses(2) 0.71 0.77 1.25 0.79 0.76 Fee Waivers(3) -- -- 0.38 -- -- Net Expenses 0.71 0.77 0.87 0.79 0.76 -------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES(1) --------------------------------------------------------------------------------------- (expenses that are deducted LARGE CAP LARGE CAP MID CAP from fund assets) BASIC VALUE GROWTH GROWTH WEINGARTEN --------------------------------------------------------------------------------------- Management Fees 0.60% 0.75% 0.80% 0.64% Distribution and/or Service (12b-1) Fees None None None None Other Expenses() [ ](4) [ ](4) [ ](4) 0.14 Total Annual Fund Operating Expenses(2) [ ] [ ] [ ] 0.78 Fee Waivers(3) -- -- -- -- Net Expenses [ ] [ ] [ ] 0.78 --------------------------------------------------------------------------------------- |
(1) There is no guarantee that actual expenses will be the same as those shown
in the table.
(2) The investment advisor has voluntarily agreed to waive a portion of the
management fee on assets in excess of $5 billion. Total Annual Fund
Operating Expenses net of this agreement are 0.75% for Constellation.
Termination of this agreement requires approval by the Board of Trustees.
(3) The transfer agent has contractually agreed to reimburse class specific
transfer agent fees to the extent necessary to limit transfer agent fees to
0.10% of average net assets of the Institutional Class. The expense
limitation agreement is in effect through October 31, 2004.
(4)Based on estimated net assets for current fiscal year.
You should also consider the effect of any account fees charged by the financial institution managing your account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the funds with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth $73 $227 $395 $ 883
Blue Chip 79 246 428 954
Capital Development 89 359 650 1,478
Charter 81 252 439 978
Constellation 78 243 422 942
Large Cap Basic Value [ ] [ ] [ ] [ ]
Large Cap Growth [ ] [ ] [ ] [ ]
Mid Cap Growth [ ] [ ] [ ] [ ]
Weingarten 80 249 433 966
---------------------------------------------------------------------------------------------------------------------------------
|
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor. A I M Capital Management, Inc. (the subadvisor), a wholly owned subsidiary of the advisor, is each of Charter's, Constellation's and Weingarten's subadvisor and is responsible for its day-to-day management. Both the advisor and the subadvisor are located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisors supervise all aspects of the funds' operations and provide investment advisory services to the funds, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the funds.
The advisor has acted as an investment advisor since its organization in 1976, and the subadvisor has acted as an investment advisor since 1986. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the funds, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 2003, the advisor received compensation from the funds at the following rates:
ANNUAL RATE
(AS A PERCENTAGE
OF AVERAGE DAILY
FUND NET ASSETS)
---- ----------------
Aggressive Growth 0.64%
Blue Chip 0.64%
Capital Development 0.67%
Charter 0.63%
Constellation 0.62%
Large Cap Basic Value 0.60%
Large Cap Growth 0.75%
Mid Cap Growth 0.80%
Weingarten 0.64%
|
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual members of the team who are primarily responsible for the management of each fund's portfolio are
AGGRESSIVE GROWTH
- Robert M. Kippes (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1992 and has been associated with the advisor and/or its affiliates since 1989.
- Karl Farmer, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1998.
- Jay K. Rushin, Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1998.
They are assisted by the Mid Cap Growth Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
BLUE CHIP
- Monika H. Degan (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1997 and has been associated with the advisor and/or its affiliates since 1995.
- Kirk L. Anderson, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/ or its affiliates since 1994.
They are assisted by the Large Cap Growth Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
CAPITAL DEVELOPMENT
- Paul J. Rasplicka (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994.
- Michael Chapman, Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 2001. From 1999 to 2001, he was an equity analyst with Chase Manhattan Bank. During part of 1999, he was a securities analyst with Gulf Investment Management. From 1995 to 1999, he was a portfolio manager with US Global Investors, Inc.
They are assisted by the Small/Mid Cap Core Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
CHARTER
- Ronald S. Sloan, Senior Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1998.
He is assisted by the Mid/Large Cap Core Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
CONSTELLATION
- Kenneth A. Zschappel (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1996 and has been associated with the advisor and/or its affiliates since 1990.
- Christian A. Costanzo, Senior Portfolio Manager, who has bee responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1995.
- Robert J. Lloyd, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2000. From 1997 to 2000, he was a trader with American Electric Power.
- Bryan A. Unterhalter, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1997.
They are assisted by the Multi Cap Growth Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
LARGE CAP BASIC VALUE
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1998.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999.
- Matthew W. Seinsheimer, Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1998.
- Michael J. Simon, Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 2001. From 1996 to 2001, he was equity analyst and portfolio manager for Luther King Capital Management.
They are assisted by the Basic Value Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
LARGE CAP GROWTH
The advisor uses a team approach to investment management. The individual members of the team (co-managers) who are primarily responsible for the management of the fund's portfolio are
- Geoffrey V. Keeling, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1995.
- Robert L. Shoss, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1995.
They are assisted by the Large Cap Growth Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
MID CAP GROWTH
The advisor uses a team approach to investment management. The individual members of the team who are primarily responsible for the management of the fund's portfolio are
- Jay K. Rushin (lead manager), Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1998.
- Karl Farmer, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1998.
They are assisted by the Mid Cap Growth Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
WEINGARTEN
- Lanny H. Sachnowitz (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1987.
- James G. Birdsall, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1997.
- Monika H. Degan, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1995.
They are assisted by the Large Cap Growth Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
Effective May 1, 2004, Monika H. Degan will be removed from the members of the team who are primarily responsible for the management of the fund's portfolio.
DIVIDENDS AND DISTRIBUTIONS
Each of the funds, except Blue Chip and Large Cap Basic Value, expects that its distributions, if any, will consist primarily of capital gains. Blue Chip and Large Cap Basic Value expect that their distributions, if any, will consist of both capital gains and ordinary income.
DIVIDENDS
The funds generally declare and pay dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The funds generally distribute long-term and short-term capital gains, if any, annually.
SUITABILITY FOR INVESTORS
The Institutional Classes of the funds are intended for use by institutional investors. Shares of the Institutional Classes of the funds are available for banks and trust companies acting in a fiduciary or similar capacity, bank and trust company common and collective trust funds, banks and trust companies investing for their own account, entities acting for the account of a public entity (e.g. Taft-Hartley funds, states, cities or government agencies), defined benefit plans, endowments, foundations and defined contribution plans offered pursuant to Sections 401, 457, 403(a), or 403(b) or (c) (defined contribution plans offered pursuant to Section 403(b) must be sponsored by a Section 501(c)(3) organization). For defined contribution plans for which the sponsor has combined defined contribution and defined benefit assets of at least $100 million there is no minimum initial investment requirement, otherwise the minimum initial investment requirement for defined contribution plans is $10 million. There is no minimum initial investment requirement for defined benefit plans; and the minimum initial investment requirement for all other investors for which the Institutional Classes of funds are available is $1 million.
The Institutional Classes of funds are designed to be convenient and economical vehicles in which institutions can invest in a portfolio of equity securities. An investment in the funds may relieve the institution of many of the investment and administrative burdens encountered when investing in equity securities directly. These include: selection and diversification of portfolio investments; surveying the market for the best price at which to buy and sell; valuation of portfolio securities; receipt, delivery and safekeeping of securities; and portfolio recordkeeping.
FUTURE FUND CLOSURE (AGGRESSIVE GROWTH)
Due to the sometimes limited availability of common stocks of smaller companies that meet the investment criteria for the fund, the fund may periodically suspend or limit the offering of its shares.
During closed periods, the fund may impose different standards for additional investments.
The financial highlights tables are intended to help you understand each fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in each fund (assuming reinvestment of all dividends and distributions).
[The information for the fiscal year ended October 31, 2003 and for the period ended October 31, 2002] has been audited by Ernst & Young LLP, whose report, along with each fund's financial statements, is included in each fund's annual report, which is available upon request.
A significant portion of Large Cap Basic Value's and Large Cap Growth's returns were attributable to their investments in IPOs during certain fiscal years prior to 2001, including the fiscal year ended October 31, 2000, which had a magnified impact on the funds due to their relatively small asset base during those periods. As the funds' assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the funds' total return.
As of the date of this prospectus Large Cap Basic Value's, Large Cap Growth's and Mid Cap Growth's Institutional Class had not yet commenced operations and therefore, financial information for the Institutional Class is not available.
AGGRESSIVE GROWTH -- INSTITUTIONAL
CLASS
----------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
2003 OCTOBER 31, 2002
------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.32 $ 9.53
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.02)(a)
------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.79 (2.19)
====================================================================================
Total from investment operations 1.76 (2.21)
====================================================================================
Net asset value, end of period $ 9.08 $ 7.32
____________________________________________________________________________________
====================================================================================
Total return(b) 24.04% (23.19)%
____________________________________________________________________________________
====================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,589 $ 138
____________________________________________________________________________________
====================================================================================
Ratio of expenses to average net assets 0.71%(c) 0.81%(d)
====================================================================================
Ratio of net investment income (loss) to average
net assets (0.37)%(c) (0.49)%(d)
____________________________________________________________________________________
====================================================================================
Portfolio turnover rate(e) 78% 68%
____________________________________________________________________________________
====================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for periods
less than one year.
(c) Ratios are annualized and based on average daily net assets of $1,401,489.
(d) Annualized.
(e) Not annualized for periods less than one year.
BLUE CHIP -- INSTITUTIONAL CLASS
----------------------------------
MARCH 15, 2002
(DATE SALES
YEAR ENDED COMMENCED)
OCTOBER 31, TO OCTOBER 31,
2003 2002
------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.26 $ 12.13
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.02(a)
------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.49 (2.89)
====================================================================================
Total from investment operations 1.55 (2.87)
====================================================================================
Net asset value, end of period $10.81 $ 9.26
____________________________________________________________________________________
====================================================================================
Total return(b) 16.74% (23.66)%
____________________________________________________________________________________
====================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 136 $ 160
____________________________________________________________________________________
====================================================================================
Ratio of expenses to average net assets 0.77%(c) 0.77%(d)
====================================================================================
Ratio of net investment income to average net
assets 0.53%(c) 0.30%(d)
____________________________________________________________________________________
====================================================================================
Portfolio turnover rate(e) 28% 28%
____________________________________________________________________________________
====================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for periods
less than one year.
(c) Ratios are based on average daily net assets of $141,917.
(d) Annualized.
(e) Not annualized for periods less than one year.
CAPITAL DEVELOPMENT --
INSTITUTIONAL CLASS
----------------------------------
MARCH 15, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
------------------------------------------------------------------------------------
Net asset value, beginning of period $12.84 $ 17.25
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) 0.02(a)
------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 3.98 (4.43)
====================================================================================
Total from investment operations 3.99 (4.41)
====================================================================================
Net asset value, end of period $16.83 $ 12.84
____________________________________________________________________________________
====================================================================================
Total return(b) 31.08% (25.57)%
____________________________________________________________________________________
====================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10 $ 7
____________________________________________________________________________________
====================================================================================
Ratio of expenses to average net assets
With fee waivers 0.87%(c) 0.84%(d)
------------------------------------------------------------------------------------
Without fee waivers 1.25%(c) 0.99%(d)
====================================================================================
Ratio of net investment income to average net
assets 0.10%(c) 0.25%(d)
____________________________________________________________________________________
====================================================================================
Portfolio turnover rate(e) 101% 120%
____________________________________________________________________________________
====================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for periods
less than one year.
(c) Ratios are based on average daily net assets of $8,217.
(d) Annualized.
(e) Not annualized for periods less than one year.
CHARTER -- INSTITUTIONAL CLASS
------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.80 $10.67 $ 18.33 $17.33 $ 13.42
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09(a) 0.06(b) 0.04 0.52 0.09
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.56 (0.93) (6.82) 1.83 4.43
====================================================================================================================
Total from investment operations 1.65 (0.87) (6.78) 2.35 4.52
====================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.07)
--------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.88) (1.35) (0.54)
====================================================================================================================
Total distributions -- -- (0.88) (1.35) (0.61)
====================================================================================================================
Net asset value, end of period $11.45 $ 9.80 $ 10.67 $18.33 $ 17.33
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(c) 16.84% (8.15)% (38.46)% 14.02% 34.61%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,061 $1,457 $ 1,648 $3,234 $66,801
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 0.79%(d) 0.79% 0.68% 0.66% 0.65%
--------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 0.79%(d) 0.83% 0.69% 0.68% 0.67%
====================================================================================================================
Ratio of net investment income to average net assets 0.90%(d) 0.52%(b) 0.25% 0.20% 0.51%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 28% 103% 78% 80% 107%
____________________________________________________________________________________________________________________
====================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective November 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premiums on debt securities. Had the Fund not amortized premiums
on debt securities, the net investment income per share and the ratio of net
investment income to average net assets would have remained the same. In
accordance with the AICPA Audit and Accounting Guide for Investment
Companies, per share and ratios prior to November 1, 2001 have not been
restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America.
(d) Ratios are based on average daily net assets of $1,652,566.
CONSTELLATION -- INSTITUTIONAL CLASS
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.40 $ 21.00 $ 45.55 $ 36.01 $ 27.25
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.06) 0.01 (0.09) (0.01)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.80 (2.54) (17.14) 12.91 9.50
=========================================================================================================================
Total from investment operations 3.77 (2.60) (17.13) 12.82 9.49
=========================================================================================================================
Less distributions from net realized gains -- -- (7.42) (3.28) (0.73)
=========================================================================================================================
Net asset value, end of period $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 20.49% (12.38)% (42.80)% 37.14% 35.46%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $154,150 $122,746 $150,609 $288,097 $244,369
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.75%(c) 0.80% 0.65% 0.65% 0.64%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.76%(c) 0.81% 0.68% 0.68% 0.66%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.13)%(c) (0.28)% 0.03% (0.18)% (0.04)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 47% 57% 75% 88% 62%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales charges.
(c) Ratios are based on average daily net assets of $132,069,108.
LARGE CAP BASIC VALUE
CLASS A
---------------------------------------------------------------
JUNE 30, 1999
(DATE
OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
---------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
Net asset value, beginning of period $ 9.20 $ 10.94 $ 12.05 $ 9.40 $10.00
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) 0.01(a) 0.02(a) 0.07(a) 0.03
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.19 (1.75) (1.07) 2.88 (0.63)
=============================================================================================================================
Total from investment operations 2.19 (1.74) (1.05) 2.95 (0.60)
=============================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.04) (0.18) --
-----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.02) (0.12) --
=============================================================================================================================
Total distributions -- -- (0.06) (0.30) --
=============================================================================================================================
Net asset value, end of period $ 11.39 $ 9.20 $ 10.94 $12.05 $ 9.40
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 23.80% (15.90)% (8.74)% 32.21% (6.00)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $121,980 $94,387 $68,676 $5,888 $1,153
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.42%(c) 1.38% 1.27% 1.25% 1.25%(d)
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.42%(c) 1.38% 1.36% 8.21% 10.02%(d)
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.01)%(c) 0.11% 0.17% 0.62% 0.87%(d)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate(e) 41% 37% 18% 57% 10%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $108,120,752.
(d) Annualized.
(e) Not annualized for periods less than one year.
LARGE CAP GROWTH
CLASS A
----------------------------------------------------------------------------
MARCH 1, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
-------- -------- -------- -------- ----------------
Net asset value, beginning of period $ 7.37 $ 8.82 $ 17.74 $ 11.29 $10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.09)(a) (0.08)(a) (0.15)(a) (0.04)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.59 (1.36) (8.84) 6.60 1.33
=================================================================================================================================
Total from investment operations 1.51 (1.45) (8.92) 6.45 1.29
=================================================================================================================================
Net asset value, end of period $ 8.88 $ 7.37 $ 8.82 $ 17.74 $11.29
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 20.49% (16.44)% (50.28)% 57.13% 13.70%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $154,052 $105,320 $138,269 $225,255 $7,785
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.82%(c) 1.70% 1.57% 1.58% 1.53%(d)(e)
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.01)%(c) (1.01)% (0.72)% (0.82)% (0.59)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 123% 111% 124% 113% 21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $118,913,817.
(d) Annualized.
(e) After fee waivers. Ratio of expenses to average net assets prior to fee waivers was 3.63% (annualized).
(f) Not annualized for periods less than one year.
MID CAP GROWTH
CLASS A
-------------------------------------------------------------
NOVEMBER 1, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------- OCTOBER 31,
2003 2002 2001 2000
-------- ------- ------- ----------------
Net asset value, beginning of period $ 6.54 $ 8.58 $ 14.38 $ 10.00
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11)(a) (0.13)(a) (0.11)(a) (0.12)(a)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.49 (1.91) (5.69) 4.50
===========================================================================================================================
Total from investment operations 2.38 (2.04) (5.80) 4.38
===========================================================================================================================
Net asset value, end of period $ 8.92 $ 6.54 $ 8.58 $ 14.38
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 36.39% (23.78)% (40.33)% 43.80%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $108,436 $63,463 $94,457 $114,913
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 1.90%(c) 1.83% 1.65% 1.63%(d)
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.42)%(c) (1.49)% (1.06)% (0.76)%(d)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(e) 211% 185% 173% 183%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $81,128,932.
(d) Annualized.
(e) Not annualized for periods less than one year.
WEINGARTEN -- INSTITUTIONAL CLASS
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.91 $ 13.16 $ 29.00 $ 28.96 $ 22.18
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00 (0.01)(a) (0.01) (0.06)(a) 0.02
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.29 (3.24) (12.29) 3.29 8.32
===========================================================================================================================
Total from investment operations 2.29 (3.25) (12.30) 3.23 8.34
===========================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.10)
---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (3.54) (3.19) (1.46)
===========================================================================================================================
Total distributions -- -- (3.54) (3.19) (1.56)
===========================================================================================================================
Net asset value, end of period $12.20 $ 9.91 $ 13.16 $ 29.00 $ 28.96
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 23.11% (24.70)% (47.11)% 11.07% 39.20%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,213 $ 1,883 $ 7,667 $18,634 $114,076
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.78%(c) 0.82% 0.69% 0.64% 0.63%
---------------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.78%(c) 0.82% 0.70% 0.68% 0.68%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.01%(c) (0.12)% (0.04)% (0.04)% 0.02%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 111% 217% 240% 145% 124%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America.
(c) Ratios are based on average daily net assets of $1,901,891.
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to many other mutual funds (the AIM funds). The following information is about all the Institutional Classes of the AIM funds.
SHARES SOLD WITHOUT SALES CHARGES
You will not pay an initial or contingent deferred sales charge on purchases of any Institutional Class of shares.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM fund Institutional Class accounts are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
----------------------------------------------------------------------------------------
Defined Benefit Plans or Platform Sponsors for Defined
Contribution Plans $ 0 no minimum
Banks acting in a fiduciary or similar capacity, Collective
and Common Trust Funds, Banks and Broker-Dealers acting for
their own account or Foundations and Endowments 1 million no minimum
Defined Contribution Plans (Corporate, Non-profit or
Governmental) 10 million no minimum
----------------------------------------------------------------------------------------
|
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed. Additionally, Federal law requires that the AIM fund verify and record your identifying information.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
----------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
The financial consultant should mail your
completed account application to the
transfer agent,
AIM Investment Services, Inc.,
P.O. Box 0843,
Houston, TX 77210-0843.
The financial consultant should call the
transfer agent at (800) 659-1005 to
receive a reference number.
Then, use the following wire instructions:
Beneficiary Bank
ABA/Routing #: 113000609
Beneficiary Account Number: 00100366732
Beneficiary Account Name: AIM Investment
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account as described above. Call the transfer agent at (800) 659-1005
and wire payment for your purchase order
in accordance with the wire instructions
noted above.
----------------------------------------------------------------------------------------------------------------------------
|
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in the same AIM fund at net asset value. Unless you specify otherwise, your dividends and distributions will automatically be reinvested in the same AIM fund.
INSTCL--02/04
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. Your broker or financial consultant may charge service fees for handling redemption transactions.
Through a Financial Consultant Contact your financial consultant.
Redemption proceeds will be sent in accordance with the wire
instructions specified in the account application provided
to the transfer agent. The transfer agent must receive your
financial intermediary's call before the close of the
customary trading session of the New York Stock Exchange
(NYSE) on days the NYSE is open for business in order to
effect the redemption at the day's closing price.
By Telephone A person who has been authorized in the account application
to effect transactions may make redemptions by telephone.
You must call the transfer agent before the close of the
customary trading session of the NYSE on days the NYSE is
open for business in order to effect the redemption at that
day's closing price.
|
TIMING AND METHOD OF PAYMENT
We normally will send out redemption proceeds within one business day, and in any event no more than seven days, after we accept your request to redeem.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will transmit the amount of the redemption
proceeds electronically to your pre-authorized bank account. We use reasonable
procedures to confirm that instructions communicated by telephone are genuine
and are not liable for telephone instructions that are reasonably believed to be
genuine.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM fund's shares is the fund's net asset value per share. The AIM funds value portfolio securities for which market quotations are readily available at market value. The AIM fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
The AIM funds value all other securities and assets at their fair value. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. In addition, if, between the time trading ends on a particular security and the close of the customary trading session of the NYSE, events occur that may materially affect the value of the security, the AIM funds may value the security at its fair value as determined in good faith by or under the supervision of the Board of Trustees of the AIM fund. The effect of using fair value pricing is that an AIM fund's net asset value will be subject to the judgment of the Board of Trustees or its designee instead of being determined by the market. Because some of the AIM funds may invest in securities that are primarily listed on foreign exchanges that trade on days when the AIM funds do not price their shares, the value of those funds' assets may change on days when you will not be able to purchase or redeem fund shares.
Each AIM fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or any earlier NYSE closing time that day.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good order. An AIM fund may postpone the right of
redemption only under unusual circumstances, as allowed by the Securities and
Exchange Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary income or long-term capital gains for federal income tax purposes, whether you reinvest them in additional shares or take them in cash. Distributions are generally taxable to you at different rates depending on the length of time the fund holds its assets and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions, regardless of how long you have held your shares. Every year, you will be sent information showing the amount of INSTCL--02/04
dividends and distributions you received from each AIM fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM fund shares will be subject to federal income tax. Exchanges of shares for shares of another AIM fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM fund shares may differ materially from the federal income tax consequences described above. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM and/or INVESCO fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
INSTCL--02/04
More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about the fund and is incorporated by reference into the prospectus (is legally a part of the prospectus). Annual and semiannual reports to shareholders contain additional information about the fund's investments. The fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds--registered trademark-- or your account, or wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact us
BY MAIL: AIM Investment Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request by
e-mail or download
prospectuses, annual or
semiannual reports via our
website:
http://www.aiminvestments.com
|
You can also review and obtain copies of the fund's SAI, reports and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM Weingarten Fund
SEC 1940 Act file number: 811-1424
AIMinvestments.com AEF-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion - dated March 1, 2004
STATEMENT OF
ADDITIONAL INFORMATION
AIM EQUITY FUNDS
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO THE INSTITUTIONAL CLASS SHARES OF EACH PORTFOLIO (EACH A "FUND", COLLECTIVELY THE "FUNDS") OF AIM EQUITY FUNDS LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INSTITUTIONAL CLASS SHARES OF THE FUNDS LISTED BELOW. YOU MAY OBTAIN A COPY OF THE PROSPECTUS FOR THE FUNDS LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING TO:
AIM INVESTMENT SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED APRIL 30, 2004, RELATES TO THE
FOLLOWING PROSPECTUS FOR THE PORTFOLIOS NAMED BELOW:
FUND DATED
---- -----
AIM AGGRESSIVE GROWTH FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM BLUE CHIP FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM CAPITAL DEVELOPMENT FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM CHARTER FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM CONSTELLATION FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM LARGE CAP BASIC VALUE FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM LARGE CAP GROWTH FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM MID CAP GROWTH FUND - INSTITUTIONAL CLASS APRIL 30, 2004
AIM WEINGARTEN FUND - INSTITUTIONAL CLASS APRIL 30, 2004
|
AIM EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION ABOUT THE TRUST..................................................... 1
Fund History................................................................... 1
Shares of Beneficial Interest.................................................. 1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS................................ 3
Classification................................................................. 3
Investment Strategies and Risks................................................ 3
Equity Investments.................................................... 8
Foreign Investments................................................... 8
Debt Investments...................................................... 10
Other Investments..................................................... 11
Investment Techniques................................................. 11
Derivatives........................................................... 15
Additional Securities or Investment Techniques........................ 22
Fund Policies.................................................................. 22
Temporary Defensive Positions.................................................. 24
MANAGEMENT OF THE TRUST................................................................. 24
Board of Trustees.............................................................. 24
Management Information......................................................... 25
Trustee Ownership of Fund Shares...................................... 26
Factors Considered in Approving the Investment Advisory Agreement..... 26
Compensation................................................................... 27
Retirement Plan For Trustees.......................................... 27
Deferred Compensation Agreements...................................... 27
Purchases of Class A Shares of the Funds at Net Asset Value........... 28
Codes of Ethics................................................................ 28
Proxy Voting Policies.......................................................... 28
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..................................... 28
INVESTMENT ADVISORY AND OTHER SERVICES.................................................. 28
Investment Advisor............................................................. 28
Investment Sub-Advisor......................................................... 30
Service Agreements............................................................. 31
Other Service Providers........................................................ 31
BROKERAGE ALLOCATION AND OTHER PRACTICES................................................ 32
Brokerage Transactions......................................................... 32
Commissions.................................................................... 32
Brokerage Selection............................................................ 33
Directed Brokerage (Research Services)......................................... 33
Regular Brokers or Dealers..................................................... 34
Allocation of Portfolio Transactions........................................... 34
Allocation of Initial Public Offering ("IPO") Transactions..................... 34
PURCHASE, REDEMPTION AND PRICING OF SHARES.............................................. 35
Purchase and Redemption of Shares.............................................. 35
Redemptions by the Funds....................................................... 35
Offering Price................................................................. 36
Redemption In Kind............................................................. 37
Backup Withholding............................................................. 37
|
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS................................................ 38
Dividends and Distributions.................................................... 38
Tax Matters.................................................................... 38
DISTRIBUTION OF SECURITIES.............................................................. 45
Distributor.................................................................... 45
CALCULATION OF PERFORMANCE DATA......................................................... 46
PENDING LITIGATION...................................................................... 51
APPENDICES:
RATINGS OF DEBT SECURITIES.............................................................. A-1
TRUSTEES AND OFFICERS................................................................... B-1
TRUSTEE COMPENSATION TABLE.............................................................. C-1
PROXY VOTING POLICIES................................................................... D-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..................................... E-1
MANAGEMENT FEES......................................................................... F-1
ADMINISTRATIVE SERVICES FEES............................................................ G-1
BROKERAGE COMMISSIONS................................................................... H-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES AND
REGULAR BROKERS OR DEALERS.............................................................. I-1
PERFORMANCE DATA........................................................................ J-1
PENDING LITIGATION...................................................................... K-1
FINANCIAL STATEMENTS.................................................................... FS
|
GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Equity Funds (the "Trust") is a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of fifteen separate portfolios: AIM Aggressive Growth Fund, AIM Basic Value II Fund (which is not currently offered to the public), AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Core Strategies Fund (which is not currently offered to the public), AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Core Equity Fund, AIM Large Cap Growth Fund, AIM Mid Cap Growth Fund, AIM U.S. Growth Fund (which is not currently offered to the public) and AIM Weingarten Fund, (each a "Fund" and collectively, the "Funds"). Under an Amended and Restated Agreement and Declaration of Trust, dated May 15, 2002, as amended (the "Trust Agreement"), the Board of Trustees of the Trust (the "Board") is authorized to create new series of shares without the necessity of a vote of shareholders of the Trust.
The Trust was originally organized on May 19, 1988 as a Maryland corporation. The Trust reorganized as a Delaware business trust on June 21, 2000. The following Funds were included in the reorganization: AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Mid Cap Growth Fund and AIM Weingarten Fund. All historical and other information contained in this Statement of Additional Information for periods prior to June 21, 2000 relating to the Funds (or a class thereof) is that of the predecessor funds (or the corresponding class thereof). AIM Basic Value II Fund, AIM Core Strategies Fund, AIM Diversified Dividend Fund and AIM U.S. Growth Fund, commenced operations as series of the Trust. Prior to May 2, 2003, AIM Diversified Dividend Fund was known as AIM Large Cap Core Equity Fund.
SHARES OF BENEFICIAL INTEREST
Shares of beneficial interest of the Trust are redeemable at their net asset value (subject, in certain circumstances, to a contingent deferred sales charge or redemption fee) at the option of the shareholder or at the option of the Trust in certain circumstances.
The Trust allocates moneys and other property it receives from the issue or sale of shares of each of its series of shares, and all income, earnings and profits from such issuance and sales, subject only to the rights of creditors, to the appropriate Fund. These assets constitute the underlying assets of each Fund, are segregated on the Trust's books of account, and are charged with the expenses of such Fund and its respective classes. The Trust allocates any general expenses of the Trust not readily identifiable as belonging to a particular Fund by or under the direction of the Board of Trustees, primarily on the basis of relative net assets, or other relevant factors.
Each share of each Fund represents an equal proportionate interest in that Fund with each other share and is entitled to such dividends and distributions out of the income belonging to such Fund as are declared by the Board.
Each Fund offers separate classes of shares as follows:
INSTITUTIONAL INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS
---- ------- ------- ------- ------- ----- -----
AIM Aggressive Growth Fund x x x X X
AIM Basic Value II Fund x x x
AIM Blue Chip Fund x x x X X X
AIM Capital Development Fund X X X X X
AIM Charter Fund X X X X X
AIM Constellation Fund X X X X X
AIM Core Strategies Fund X X X
AIM Dent Demographic Trends Fund X X X
AIM Diversified Dividend Fund X X X
AIM Emerging Growth Fund X X X
AIM Large Cap Basic Value Fund X X X X X X
AIM Large Cap Growth Fund X X X X X X
AIM Mid Cap Growth Fund X X X X X
AIM U.S. Growth Fund X X X
AIM Weingarten Fund X X X X X
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This Statement of Additional Information relates solely to the Institutional Classes of these nine Funds.
Each class of shares represents interests in the same portfolio of investments. Differing sales charges and expenses will result in differing net asset values and dividends and distributions. Upon any liquidation of the Trust, shareholders of each class are entitled to share pro rata in the net assets belonging to the applicable Fund allocable to such class available for distribution after satisfaction of outstanding liabilities of the Fund allocable to such class.
Each share of a Fund has the same voting, dividend, liquidation and other rights; however, each class of shares of a Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan.
Except as specifically noted above, shareholders of each Fund are entitled to one vote per share (with proportionate voting for fractional shares), irrespective of the relative net asset value of the shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an example of a matter that
would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. Other than the automatic conversion of Class B shares to Class A shares, there are no conversion rights. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, that shareholders could, under certain circumstances, be held liable for the obligations of the Trust to the extent the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees to all parties, and each party thereto must expressly waive all rights of action directly against shareholders of the Trust. The Trust Agreement provides for indemnification out of the property of a Fund for all losses and expenses of any shareholder of such Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act, omission or obligation of the Trust or any trustee or officer; however, a trustee or officer is not protected against any liability to the Trust or to the shareholders to which a trustee or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office with the Trust ("Disabling Conduct"). The Trust Agreement provides for indemnification by the Trust of the trustees, the officers and employees or agents of the Trust, provided that such persons have not engaged in Disabling Conduct. The Trust Agreement also authorizes the purchase of liability insurance on behalf of trustees and officers.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or require the Trust to issue share certificates.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Trust is an open-end management investment company. Each of the Funds is "diversified" for purposes of the 1940 Act.
INVESTMENT STRATEGIES AND RISKS
The table on the following pages identifies various securities and
investment techniques used by AIM in managing The AIM Family of Funds --Registered Trademark--. The table has been marked to indicate those securities and investment techniques that AIM may use to manage a Fund. A Fund may not use all of these techniques at any one time. A Fund's transactions in a particular security or use of a particular technique is subject to limitations imposed by a Fund's investment objective, policies and restrictions described in that Fund's Prospectus and/or this Statement of Additional Information, as well as federal securities laws. The Funds' investment objectives, policies, strategies and practices are non-fundamental unless otherwise indicated. A more detailed description of the securities and investment techniques, as well as the risks associated with those securities and investment techniques that the Funds utilize, follows the table. The descriptions of the securities and investment techniques in this section supplement the discussion of principal investment strategies contained in each Fund's Prospectus; where a particular type of security or
investment technique is not discussed in a Fund's Prospectus, that security or investment technique is not a principal investment strategy.
AIM EQUITY FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
--------- AIM
SECURITY/ AIM CAPITAL AIM
INVESTMENT AGGRESSIVE AIM DEVELOPMENT AIM CONSTELLATION
TECHNIQUE GROWTH FUND BLUE CHIP FUND FUND CHARTER FUND FUND
--------- ----------- -------------- ---- ------------ ----
EQUITY INVESTMENTS
Common Stock X X X X X
Preferred Stock X X X X X
Convertible X X X X X
Securities
Alternative Entity X X X X X
Securities
FOREIGN INVESTMENTS
Foreign Securities X X X X X
Foreign Government X X X X X
Obligations
Foreign Exchange X X X X X
Transactions
DEBT INVESTMENTS FOR EQUITY FUNDS
U.S. Government X X X X X
Obligations
Liquid Assets X X X X X
Investment Grade
Corporate Debt
Obligations X X X X X
Junk Bonds
OTHER INVESTMENTS
REITs X X X X X
Other Investment X X X X X
Companies
Defaulted Securities
Municipal Forward
Contracts
FUND
--------- AIM AIM AIM
SECURITY/ LARGE CAP LARGE MID CAP AIM
INVESTMENT BASIC VALUE CAP GROWTH GROWTH WEINGARTEN
TECHNIQUE FUND FUND FUND FUND
--------- ---- ---- ---- ----
EQUITY INVESTMENTS
Common Stock X X X X
Preferred Stock X X X X
Convertible X X X X
Securities
Alternative Entity X X X X
Securities
FOREIGN INVESTMENTS
Foreign Securities X X X X
Foreign Government X X X X
Obligations
Foreign Exchange X X X X
Transactions
DEBT INVESTMENTS FOR EQUITY FUNDS
U.S. Government X X X X
Obligations
Liquid Assets X X X X
Investment Grade
Corporate Debt
Obligations X X X X
Junk Bonds
OTHER INVESTMENTS
REITs X X X X
Other Investment X X X X
Companies
Defaulted Securities
Municipal Forward
Contracts
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AIM EQUITY FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
--------- AIM
SECURITY/ AIM CAPITAL AIM
INVESTMENT AGGRESSIVE AIM DEVELOPMENT AIM CONSTELLATION
TECHNIQUE GROWTH FUND BLUE CHIP FUND FUND CHARTER FUND FUND
--------- ----------- -------------- ---- ------------ ----
Variable or
Floating Rate
Instruments
Indexed Securities
Zero-Coupon and
Pay-in-Kind
Securities
Synthetic Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed Delivery X X X X X
Transactions
When-Issued X X X X X
Securities
Short Sales X X X X X
Margin Transactions
Swap Agreements X X X X X
Interfund Loans X X X X X
Borrowing X X X X X
Lending Portfolio X X X X X
Securities
Repurchase Agreements X X X X X
Reverse Repurchase X
Agreements
Dollar Rolls
Illiquid Securities X X X X X
Rule 144A Securities X X X X X
Unseasoned Issuers X
FUND
--------- AIM AIM AIM
SECURITY/ LARGE CAP LARGE MID CAP AIM
INVESTMENT BASIC VALUE CAP GROWTH GROWTH WEINGARTEN
TECHNIQUE FUND FUND FUND FUND
--------- ---- ---- ---- ----
Variable or
Floating Rate
Instruments
Indexed Securities
Zero-Coupon and
Pay-in-Kind
Securities
Synthetic Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed Delivery X X X X
Transactions
When-Issued X X X X
Securities
Short Sales X X X X
Margin Transactions X X X
Swap Agreements X X X X
Interfund Loans X X X X
Borrowing X X X X
Lending Portfolio X X X X
Securities
Repurchase X X X X
Agreements
Reverse Repurchase X X
Agreements
Dollar Rolls X X X
Illiquid Securities X X X X
Rule 144A Securities X X X X
Unseasoned Issuers X X
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FUND
--------- AIM AIM
SECURITY/ AIM CAPITAL AIM LARGE CAP
INVESTMENT AGGRESSIVE AIM DEVELOPMENT AIM CONSTELLATION BASIC VALUE
TECHNIQUE GROWTH FUND BLUE CHIP FUND FUND CHARTER FUND FUND FUND
--------- ----------- -------------- ---- ------------ ---- ----
Sale of Money
Market Securities
Standby Commitments
DERIVATIVES
Equity-Linked X X X X X X
Derivatives
Put Options X X X X X X
Call Options X X X X X X
Straddles X X X X X X
Warrants X X X X X X
Futures Contracts
and Options on
Futures Contracts X X X X X X
Forward Currency X X X X X X
Contracts
Cover X X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Special Situations X
FUND
--------- AIM AIM
SECURITY/ LARGE MID CAP AIM
INVESTMENT CAP GROWTH GROWTH WEINGARTEN
TECHNIQUE FUND FUND FUND
--------- ---- ---- ----
Sale of Money
Market Securities
Standby Commitments
DERIVATIVES
Equity-Linked X X X
Derivatives
Put Options X X X
Call Options X X X
Straddles X X X
Warrants X X X
Futures Contracts X X X
and Options on
Futures Contracts
Forward Currency X X X
Contracts
Cover X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Special Situations
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Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund. AIM Blue Chip Fund does not intend to invest more than 10% of its total assets in convertible securities.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited partnerships, limited liability companies, business trusts or other non-corporate entities may issue equity securities that are similar to common or preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by issuers outside the United States, and include securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 25% of its total assets in foreign securities, except that each of AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund may invest up to 20% of its total assets in foreign securities.
Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the
U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the Funds invest will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States.
Risks of Developing Countries. Each Fund may invest up to 5% of its total assets in securities of companies located in developing countries. Developing countries are those countries which are not included in the MSCI World Index. The Funds consider various factors when determining whether a company is in a developing country, including whether (1) it is organized under the laws of a developing country; (2) it has a principal office in a developing country; (3) it derives 50% or more of its total revenues from business in a developing country; or (4) its securities are traded principally on a stock exchange, or in an over-the-counter market, in a developing country. Investments in developing countries present risks greater than, and in addition to, those presented by investments in foreign issuers in general. A number of developing countries restrict, to varying degrees, foreign investment in stocks. Repatriation of investment income, capital, and the proceeds of sales by foreign investors may require governmental registration and/or approval in some developing countries. A number of the currencies of developing countries have experienced significant declines against the U.S. dollar in recent years, and devaluation may occur subsequent to investments in these currencies by the Funds. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain emerging market countries. Many of the developing securities markets are relatively small or less diverse, have low trading volumes, suffer periods of relative illiquidity, and are characterized by significant price volatility. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on the Fund's investments.
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities, that issue them. These securities involve the risks discussed above with respect to foreign securities. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay principal when due. Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the governments of developing
countries. Foreign government obligations of developing countries, and some structures of emerging market debt securities, both of which are generally below investment grade, are sometimes referred to as "Brady Bonds."
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. A Fund may commit the same percentage of its total assets to foreign exchange hedges as it can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities.
Debt Investments
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their "face value," and may exhibit greater price volatility than interest-bearing securities since investors receive no payment until maturity. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association ("FNMA"), are supported by the right of the issuer to borrow from the Treasury; others, such as those of the Student Loan Marketing Association ("SLMA"), are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, though issued by an instrumentality chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so.
LIQUID ASSETS. Cash equivalents include money market instruments (such as certificates of deposit, time deposits, bankers' acceptances from U.S. or foreign banks, and repurchase agreements), shares of affiliated money market funds or high-quality debt obligations (such as U.S. Government obligations, commercial paper, master notes and other short-term corporate instruments, and municipal obligations).
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its investment adviser may consider (i) general economic and financial conditions; (ii) the specific issuer's (a) business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign
issuers, unique political, economic or social conditions applicable to such issuer's country; and, (iii) other considerations deemed appropriate. AIM Blue Chip Fund will not invest in non-convertible corporate debt securities rated below investment grade by Standard and Poor's Ratings Services ("S&P") and Moody's Investors Service ("Moody's") or in unrated non-convertible corporate debt securities believed by the Funds' investment advisor to be below investment grade quality.
Descriptions of debt securities ratings are found in Appendix A.
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITs"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both.
To the extent consistent with their respective investment objectives and policies, each Fund may invest up to 15% of its total assets in equity and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. A Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, environmental liability risks, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage REITs are dependent upon management skill, are not diversified, and are therefore subject to the risk of financing single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to maintain an exemption from the 1940 Act. Changes in interest rates may also affect the value of debt securities held by a Fund. By investing in REITs indirectly through a Fund, a shareholder will bear not only his/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of another investment company, including Affiliated Money Market Funds (defined below), the Fund will indirectly bear its proportionate share of the advisory fees and other operating expenses of such investment company. The Funds have obtained an exemptive order from the SEC allowing them to invest in money market funds that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"), provided that investments in Affiliated Money Market Funds do not exceed 25% of the total assets of the investing Fund.
The following restrictions apply to investments in other investment companies other than Affiliated Money Market Funds: (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment companies.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred to as forward commitments, involve commitments by a Fund to dealers or issuers to acquire or sell securities at a specified future date beyond the customary settlement for such securities. These commitments may fix the payment price and interest basis rate to be received or paid on the investment. A Fund may purchase
securities on a delayed delivery basis to the extent it can anticipate having available cash on settlement date. Delayed delivery agreements will not be used as a speculative or leverage technique except for AIM Constellation Fund.
Investment in securities on a delayed delivery basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must engage in portfolio transactions in order to honor a delayed delivery commitment. Until the settlement date, a Fund will segregate liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery transactions. Such segregated liquid assets will be marked-to-market daily, and the amount segregated will be increased if necessary to maintain adequate coverage of the delayed delivery commitments. No additional delayed delivery agreements or when-issued commitments (as described below) will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
The delayed delivery securities, which will not begin to accrue interest or dividends until the settlement date, will be recorded as an asset of a Fund and will be subject to the risk of market fluctuation. The purchase price of the delayed delivery securities is a liability of a Fund until settlement. Absent extraordinary circumstances, a Fund will not sell or otherwise transfer the delayed delivery basis securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, a Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis means that the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued. The payment obligation and, if applicable, the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. A Fund will only make commitments to purchase such securities with the intention of actually acquiring such securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a Fund's portfolio are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of interest rates. Therefore, if a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, the Fund will do so by using then available cash flow, by sale of the segregated liquid assets, by sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the Fund's payment obligation).
Investment in securities on a when-issued basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must sell another security in order to honor a when-issued commitment. If a Fund purchases a when-issued security, the Fund will segregate liquid assets in an amount equal to the when-issued commitment. If the market value of such segregated assets declines, additional liquid assets will be segregated on a daily basis so that the market value of the segregated assets will equal the amount of the Fund's when-issued commitments. No additional delayed delivery agreements (as described above) or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
SHORT SALES. In a short sale, a Fund does not immediately deliver the securities sold and does not receive the proceeds from the sale. A Fund is said to have a short position in the securities sold until it delivers the securities sold, at which time it receives the proceeds of the sale. A Fund will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security, or when the Fund does not want to sell the security it owns, because it wishes to defer recognition of gain or loss for federal income tax purposes. In such case, any future losses in a Fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount a Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. In determining the number of shares to be sold short against a Fund's position in a convertible security, the anticipated fluctuation in the conversion premium is considered. A Fund may also make short sales to generate additional income from the investment of the cash proceeds of short sales.
A Fund will only make short sales "against the box," meaning that at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short. To secure its obligation to deliver the securities sold short, a Fund will segregate with its custodian an equal amount to the securities sold short or securities convertible into or exchangeable for such securities. A Fund may pledge no more than 10% of its total assets as collateral for short sales against the box.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. The payment by a Fund of initial or variation margin in connection with futures or related options transactions will not be considered the purchase of a security on margin.
SWAP AGREEMENTS. Each Fund may enter into interest rate, index and currency exchange rate swap agreements for purposes of attempting to obtain a particular desired return at a lower cost to the Fund than if it had invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Commonly used swap agreements include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictitious basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. Most swap agreements entered into by a Fund would calculate the obligations on a "net basis." Consequently, a Fund's obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). Obligations under a swap agreement will be accrued daily (offset against amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating liquid assets to avoid any potential leveraging of the Fund. A Fund will not enter into a swap agreement with any single party if the net amount owed to or to be received under existing contracts with that party would exceed 5% of the Fund's total assets. For a discussion of the tax considerations relating to swap agreements, see "Dividends, Distributions and Tax Matters - Swap Agreements."
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net assets to other Funds advised by AIM (the "AIM Funds") and each Fund may borrow from other AIM Funds to the extent permitted under such Fund's investment restrictions. During temporary or emergency periods, the percentage of a Fund's net assets that may be loaned to other AIM Funds may be increased as permitted by the SEC. If any interfund loans are outstanding, a Fund cannot make any additional investments. If a Fund has borrowed from other AIM Funds and has aggregate borrowings from all sources that exceed 10% of such Fund's total assets, such Fund will secure all of its loans from other AIM Funds. The ability of a Fund to lend its securities to other AIM Funds is subject to certain other terms and conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary or emergency purposes. If there are unusually heavy redemptions because of changes in interest rates or for any other reason, a Fund may have to sell a portion of its investment portfolio at a time when it may be disadvantageous to do so. Selling fund securities under these circumstances may result in a lower net asset value per share or decreased dividend income, or both. The Trust believes that, in the event of abnormally heavy redemption requests, a Fund's borrowing ability would help to mitigate any such effects and could make the forced sale of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio securities (principally to broker-dealers) where such loans are callable at any time and are continuously secured by segregated collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash, letters of credit, or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Each Fund may lend portfolio securities to the extent of one-third of its total assets.
The Fund would continue to receive the income on loaned securities and would, at the same time, earn interest on the loan collateral or on the investment of any cash collateral. A Fund will not have the right to vote securities while they are being lent, but it can call a loan in anticipation of an important vote. Any cash collateral pursuant to these loans would be invested in short-term money market instruments or Affiliated Money Market Funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned increases and the collateral is not increased accordingly or in the event of default by the borrower. The Fund could also experience delays and costs in gaining access to the collateral.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a Fund acquires ownership of a security from a broker-dealer or bank that agrees to repurchase the security at a mutually agreed upon time and price (which is higher than the purchase price), thereby determining the yield during a Fund's holding period. A Fund may, however, enter into a "continuing contract" or "open" repurchase agreement under which the seller is under a continuing obligation to repurchase the underlying obligation from the Fund on demand and the effective interest rate is negotiated on a daily basis. Each of the Funds may engage in repurchase agreement transactions involving the types of securities in which it is permitted to invest.
If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, a Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. The securities underlying a repurchase agreement will be marked to market every business day so that the value of such securities is at least equal to the investment value of the repurchase agreement, including any accrued interest thereon.
The Funds may invest their cash balances in joint accounts with other AIM Funds for the purpose of investing in repurchase agreements with maturities not to exceed 60 days, and in certain other money market instruments with remaining maturities not to exceed 90 days. Repurchase agreements are considered loans by a Fund under the 1940 Act.
AIM Charter Fund may enter into repurchase agreements (at any time up to 50% of its total net assets), using only U.S. Government securities, for the sole purpose of increasing its yield on idle cash.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are
agreements that involve the sale of securities held by a Fund to financial
institutions such as banks and broker-dealers, with an agreement that the Fund
will repurchase the securities at an agreed upon price and date. A Fund may
employ reverse repurchase agreements (i) for temporary emergency purposes, such
as to meet unanticipated net redemptions so as to avoid liquidating other
portfolio securities during unfavorable market conditions; (ii) to cover
short-term cash requirements resulting from the timing of trade settlements; or
(iii) to take advantage of market situations where the interest income to be
earned from the investment of the proceeds of the transaction is greater than
the interest expense of the transaction. At the time it enters into a reverse
repurchase agreement, a Fund will segregate liquid assets having a dollar value
equal to the repurchase price, and will subsequently continually monitor the
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements involve the risk that the market value of securities to be
purchased by the Fund may decline below the price at which it is obligated to
repurchase the securities, or that the other party may default on its
obligation, so that the Fund is delayed or prevented from completing the
transaction. Reverse repurchase agreements are considered borrowings by a Fund
under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be disposed of within seven days in the normal course of business at the price at which they are valued. Illiquid securities may include securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in certain circumstances, be resold pursuant to Rule 144A, under the 1933 Act, and thus may or may not constitute illiquid securities.
Each Fund may invest up to 15% of its net assets in securities that are illiquid. Limitations on the resale of restricted securities may have an adverse effect on their marketability, which may prevent a Fund from disposing of them promptly at reasonable prices. A Fund may have to bear the expense of registering such securities for resale, and the risk of substantial delays in effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A
under the 1933 Act. This Rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Board of Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the Funds' restriction on investment in
illiquid securities. Determination of whether a Rule 144A security is liquid or
not is a question of fact. In making this determination AIM will consider the
trading markets for the specific security taking into account the unregistered
nature of a Rule 144A security. In addition, AIM could consider the (i)
frequency of trades and quotes; (ii) number of dealers and potential purchasers;
(iii) dealer undertakings to make a market; and (iv) nature of the security and
of market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). AIM will also
monitor the liquidity of Rule 144A securities and, if as a result of changed
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM
will review a Fund's holdings of illiquid securities to determine what, if any,
action is required to assure that such Fund complies with its restriction on
investment in illiquid securities. Investing in Rule 144A securities could
increase the amount of each Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
UNSEASONED ISSUERS. Investments in the equity securities of companies having less than three years' continuous operations (including operations of any predecessor) involve more risk than investments in the securities of more established companies because unseasoned issuers have only a brief operating history and may have more limited markets and financial resources. As a result, securities of unseasoned issuers tend to be more volatile than securities of more established companies.
Derivatives
The Funds may each invest in forward currency contracts, futures contracts, options on securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge
against the overall level of investment and currency risk normally associated with each Fund's investments. The Funds may also invest in equity-linked derivative products designed to replicate the composition and performance of particular indices. These instruments are often referred to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the performance of another asset (such as a security, currency or an index of securities).
EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a securities portfolio designed to replicate the composition and performance of a particular index. Equity-Linked Derivatives are exchange traded. The performance results of Equity-Linked Derivatives will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by the Equity-Linked Derivatives. Examples of such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial Average Instruments ("DIAMONDS") and Optimised Portfolios As Listed Securities ("OPALS"). Investments in Equity-Linked Derivatives involve the same risks associated with a direct investment in the types of securities included in the indices such products are designed to track. There can be no assurance that the trading price of the Equity-Linked Derivatives will equal the underlying value of the basket of securities purchased to replicate a particular index or that such basket will replicate the index. Investments in Equity-Linked Derivatives may constitute investments in other investment companies and, therefore, a Fund may be subject to the same investment restrictions with Equity-Linked Derivatives as with other investment companies. See "Other Investment Companies."
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the call option, the writer of a call option is obligated to sell the underlying security, contract or foreign currency. A put option gives the purchaser the right to sell the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration date of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the put option, the writer of a put option is obligated to buy the underlying security, contract or foreign currency. The premium paid to the writer is consideration for undertaking the obligations under the option contract. Until an option expires or is offset, the option is said to be "open." When an option expires or is offset, the option is said to be "closed."
A Fund will not write (sell) options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at any time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets.
Pursuant to federal securities rules and regulations, if a Fund writes options, it may be required to set aside assets to reduce the risks associated with using those options. This process is described in more detail below in the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, contract, or foreign currency above the exercise price so long as the option remains open, but retains the risk of loss should the price of the security, contract, or foreign currency decline.
A Fund may write a put option without owning the underlying security if it covers the option as described in the section "Cover." A Fund may only write a put option on a security as part of an
investment strategy and not for speculative purposes. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If a call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the price it is willing to pay for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of acquiring the underlying security, contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected increase in the market price of the underlying security, contract or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. Each of the Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads."
A Fund may only purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options (i.e., the market value) as illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes index options, it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
STRADDLES. The Funds, for hedging purposes, may write straddles (combinations of put and call options on the same underlying security) to adjust the risk and return characteristics of the Funds' overall position. A possible combined position would involve writing a covered call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written covered call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant and various other investment factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place (collectively, "Futures Contracts"). A stock index Futures Contract provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that is, Futures Contracts will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures Contracts will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. A Fund's hedging may include sales of Futures Contracts as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures Contracts as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices.
The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Investments" in this Statement of Additional Information.
Closing out an open Futures Contract is effected by entering into an offsetting Futures Contract for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular Futures Contract at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must be deposited by a Fund in order to initiate Futures Contracts trading and maintain its open positions in Futures Contracts. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Futures Contract is set by the exchange on which the Futures Contract is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures Contract margin account. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on Certain Options on Currencies. To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward currency contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward currency contract or option is deemed to be illiquid, the assets used to "cover" a Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, a Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding forward currency contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair a Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction.
Additional Securities or Investment Techniques
SPECIAL SITUATIONS. AIM Constellation Fund may invest in "special situations." A special situation arises when, in the opinion of the Fund's management, the securities of a particular company will, within a reasonably estimated period of time, be accorded market recognition at an appreciated value solely by reason of a development applicable to that company, and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others: liquidations, reorganizations, recapitalizations, mergers, material litigation, technical breakthroughs, and new management or management policies. Although large and well-known companies may be involved, special situations more often involve comparatively small or unseasoned companies. Investments in unseasoned companies and special situations often involve much greater risk than in ordinary investment securities.
FUND POLICIES
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment restrictions, which may be changed only by a vote of such Fund's outstanding shares. Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or more of the Fund's shares present at a meeting if the holders of more than 50% of the outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares. Any investment restriction that involves a maximum or minimum percentage of securities or assets (other than with respect to borrowing) shall not be considered to be violated unless an excess over or a deficiency under the percentage occurs immediately after, and is caused by, an acquisition or disposition of securities or utilization of assets by the Fund.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The Fund will not purchase the securities of any issuer if, as a result, the Fund would fail to be a diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated thereunder, as such statute, rules and regulations are amended from time to time or are interpreted from time to time by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or except to the extent that the Fund may be permitted to do so by exemptive order or similar relief (collectively, with the 1940 Act Laws and Interpretations, the "1940 Act Laws, Interpretations and Exemptions"). In complying with this restriction, however, the Fund may purchase securities of other investment companies to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the 1933 Act.
(4) The Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt obligations issued by governments or political subdivisions of governments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from investing in
issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to persons who control or are under common control with the Fund, except to the extent permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests.
(8) The Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund.
The investment restrictions set forth above provide each of the Funds with the ability to operate under new interpretations of the 1940 Act or pursuant to exemptive relief from the SEC without receiving prior shareholder approval of the change. Even though each of the Funds has this flexibility, the Board of Trustees has adopted non-fundamental restrictions for each of the Funds relating to certain of these restrictions which AIM and certain Funds' sub-advisors must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment restrictions apply to each of the Funds. They may be changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities of other money market funds and lend money to other investment companies or their series portfolios that have AIM or an affiliate of AIM as an investment advisor (an "AIM Advised Fund"), subject to the terms and conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33"% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from banks, broker-dealers or an AIM Advised Fund. Other than AIM Constellation Fund, the Fund may not borrow for leveraging, but may borrow for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. AIM Constellation Fund may not purchase additional securities when any borrowings from an AIM Advised Fund are outstanding. Each other Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets or when any borrowings from an AIM Advised Fund are outstanding.
(3) In complying with the fundamental restriction regarding industry concentration, the Fund may invest up to 25% of its total assets in the securities of issuers whose principal business activities are in the same industry.
(4) In complying with the fundamental restriction with regard to making loans, the Fund may lend up to 33"% of its total assets and may lend money to an AIM Advised Fund, on such terms and conditions as the SEC may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to investing all assets in an open-end fund, the Fund may not invest all of its assets in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and restrictions as the Fund.
(6) Notwithstanding the fundamental restriction with regard to engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities, the Fund currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
(7) The Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:
(1) AIM Blue Chip Fund normally invests at least 80% of its assets in securities of blue chip companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(2) The amount AIM Constellation Fund may borrow will also be limited by the applicable margin limitations imposed by the Federal Reserve Board. If at any time the value of AIM Constellation Fund's assets should fail to meet the 300% asset coverage requirement, the Fund will, within three days, reduce its borrowings to the extent necessary. AIM Constellation Fund may be required to eliminate partially or totally its outstanding borrowings at times when it may not be desirable for it to do so. Any investment gains made by AIM Constellation Fund with the borrowed monies in excess of interest paid by the Fund will cause the net asset value of AIM Constellation Fund's shares to rise faster than would otherwise be the case. On the other hand, if the investment performance of the additional securities purchased with the proceeds of such borrowings fails to cover the interest paid on the money borrowed by AIM Constellation Fund, the net asset value of AIM Constellation Fund will decrease faster than would otherwise be the case. This speculative factor is known as "leveraging."
(3) AIM Mid Cap Growth Fund normally invests at least 80% of its assets in securities of mid-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(4) AIM Large Cap Basic Value Fund normally invests at least 80% of its assets in securities of large-capitalization companies that offer potential for capital growth, and may offer potential for current income. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(5) AIM Large Cap Growth Fund normally invests at least 80% of its assets in securities of large-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the Funds may temporarily hold all or a portion of their assets in cash, cash equivalents or high-quality debt obligations. Each of the Funds may also invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The overall management of the business and affairs of the Funds and the Trust is vested in the Board of Trustees. The Board of Trustees approves all significant agreements between the Trust, on behalf of one or more of the Funds, and persons or companies furnishing services to the Funds. The day-to-day operations of each Fund are delegated to the officers of the Trust and to AIM, subject always to the objective(s), restrictions and policies of the applicable Fund and to the general supervision of the Board of Trustees. Certain trustees and officers of the Trust are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the parent corporation of AIM. All of the Trust's executive officers hold similar offices with some or all of the other AIM Funds.
MANAGEMENT INFORMATION
The trustees and officers of the Trust, their principal occupations during the last five years and certain other information concerning them is set forth in Appendix B.
The standing committees of the Board of Trustees are the Audit Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Committee Relating to Market Timing.
The members of the Audit Committee are Bob R. Baker, James T. Bunch, Edward K. Dunn, Jr. (Chair), Lewis F. Pennock, Dr. Larry Soll, Dr. Prema Mathai-Davis and Ruth H. Quigley (Vice Chair). The Audit Committee is responsible for: the appointment, compensation and oversight of any independent auditors employed by the Funds (including monitoring the independence, qualifications and performance of such auditors and resolution of disagreements between the Funds' management and the auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services; (ii) overseeing the financial reporting process of the Funds; (iii) monitoring the process and the resulting financial statements prepared by management to promote accuracy and integrity of the financial statements and asset valuation; (iv) to assist the Board's oversight of the Funds' compliance with legal and regulatory requirements that relate to the Funds' accounting and financial reporting, internal control over financial reporting and independent audits; (v) to the extent required by Section 10A of the Securities Exchange Act of 1934, to pre-approve all permissible non-audit services that are provided to the Funds by its independent auditors; (vi) to pre-approve, in accordance with Item 2.01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by the Fund's independent auditors to the Fund's investment advisor and certain other affiliated entities; and (vii) to the extent required by Regulation 14A, to prepare an audit committee report for inclusion in the Fund's annual proxy statement. During the fiscal year ended October 31, 2003, the Audit Committee held seven meetings.
The members of the Governance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden, Jack M. Fields (Vice Chair), Gerald J. Lewis
and Louis S Sklar. The Governance Committee is responsible for: (i) nominating
persons who are not interested persons of the Trust for election or appointment:
(a) as additions to the Board, (b) to fill vacancies which, from time to time,
may occur in the Board and (c) for election by shareholders of the Trust at
meetings called for the election of trustees; (ii) nominating persons for
appointment as members of each committee of the Board, including, without
limitation, the Audit Committee, the Governance Committee, the Investments
Committee and the Valuation Committee, and to nominate persons for appointment
as chair and vice chair of each such committee; (iii) reviewing from time to
time the compensation payable to the trustees and making recommendations to the
Board regarding compensation; (iv) reviewing and evaluating from time to time
the functioning of the Board and the various committees of the Board; (v)
selecting independent legal counsel to the independent trustees and approving
the compensation paid to independent legal counsel; and (vi) approving the
compensation paid to independent counsel and other advisers, if any, to the
Audit Committee of the Trust.
The Governance Committee will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. During the fiscal year ended
October 31, 2003, the Governance Committee held five meetings.
Notice procedures set forth in the Trust's bylaws require that any shareholder of a Fund desiring to nominate a trustee for election at a shareholder meeting must submit to the Trust's Secretary the nomination in writing not later than the close of business on the later of the 90th day prior to such shareholder meeting or the tenth day following the day on which public announcement is made of the shareholder meeting and not earlier than the close of business on the 120th day prior to the shareholder meeting.
The members of the Investments Committee are Messrs. Baker, Bayley, Bunch, Crockett, Dowden (Chair), Dunn, Fields, Lewis, Pennock, Sklar and Soll, and Carl Frischling, and Dr. Mathai-Davis (Vice Chair) and Miss Quigley. The Investments Committee is responsible for: (i) overseeing AIM's investment-related compliance systems and procedures to ensure their continued adequacy; and (ii) considering and acting, on an interim basis between meetings of the full Board, on investment-related matters requiring Board consideration. During the fiscal year ended October 31, 2003, the Investment Committee held four meetings.
The members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee meets on an ad
hoc basis to review matters related to valuation. During the fiscal year ended
October 31, 2003, the Valuation Committee held one meeting.
The members of the Special Committee Relating to market Timing issues are Messrs. Crockett, Dowden, Dunn, and Lewis (Chair). The purpose of the Special Committee Relating to Market Timing Issues is to remain informed on matters relating to alleged excessive short term trading in shares of the Funds ("market timing") and to provide guidance to special counsel for the independent trustees on market timing issues and related matters between meetings of the independent trustees. During the fiscal year ended October 31, 2003, the Special Committee Relating to Market Timing issues did not meet.
Trustee Ownership of Fund Shares
The dollar range of equity securities beneficially owned by each trustee (i) in the Funds and (ii) on an aggregate basis, in all registered investment companies overseen by the trustee within the AIM Funds complex is set forth in Appendix B.
Factors Considered in Approving the Investment Advisory Agreement
The advisory agreement with AIM was re-approved by the Funds' Board at a meeting held on May 13-14, 2003. In evaluating the fairness and reasonableness of the advisory agreement, the Board of Trustees considered a variety of factors for each Fund, including: the requirements of each Fund for investment supervisory and administrative services; the quality of AIM's services, including a review of each Fund's investment performance and AIM's investment personnel; the size of the fees in relationship to the extent and quality of the investment advisory services rendered; fees charged to AIM's other clients; fees charged by competitive investment advisors; the size of the fees in light of services provided other than investment advisory services; the expenses borne by each Fund as a percentage of its assets and relationship to contractual limitations; any fee waivers (or payments of Fund expenses) by AIM; AIM's profitability; the benefits received by AIM from its relationship to each Fund, including soft dollar arrangements, and the extent to which each Fund shares in those benefits; the organizational capabilities and financial condition of AIM and conditions and trends prevailing in the economy, the securities markets and the mutual fund industry; and the historical relationship between each Fund and AIM.
In considering the above factors, the Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of each Fund may be invested in money market funds advised by AIM pursuant to the terms of an exemptive order. The Board found that each Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that each Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board further determined that the proposed securities lending program and related procedures with respect to each of the lending Funds is in the best interests of each lending Fund and their respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of each lending Fund and its respective shareholders.
After consideration of these factors, the Board found that: (i) the services provided to each Fund and its shareholders were adequate; (ii) the agreements were fair and reasonable under the circumstances; and (iii) the fees payable under the agreements would have been obtained through arm's length negotiations. The Board therefore concluded that each Fund's advisory agreement was in the best interests of the Fund and its shareholders and continued the agreement for an additional year.
COMPENSATION
Each trustee who is not affiliated with AIM is compensated for his or her services according to a fee schedule which recognizes the fact that such trustee also serves as a director or trustee of other AIM Funds. Each such trustee receives a fee, allocated among the AIM Funds for which he or she serves as a director or trustee, which consists of an annual retainer component and a meeting fee component.
Information regarding compensation paid or accrued for each trustee of the Trust who is not affiliated with AIM during the year ended December 31, 2003 is found in Appendix C.
Retirement Plan For Trustees
The trustees have adopted a retirement plan for the trustees of the Trust who are not affiliated with AIM. The retirement plan includes a retirement policy as well as retirement benefits for the non-AIM-affiliated trustees.
The retirement policy permits each non-AIM-affiliated trustee to serve until December 31 of the year in which the trustee turns 72. A majority of the trustees may extend from time to time the retirement date of a trustee.
Annual retirement benefits are available to each non-AIM-affiliated
trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has
at least five years of credited service as a trustee (including service to a
predecessor fund) for a Covered Fund. The retirement benefits will equal 75% of
the trustee's annual retainer paid or accrued by any Covered Fund to such
trustee during the twelve-month period prior to retirement, including the amount
of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the trustee. The annual retirement benefits are
payable in quarterly installments for a number of years equal to the lesser of
(i) ten or (ii) the number of such trustee's credited years of service. A death
benefit is also available under the plan that provides a surviving spouse with a
quarterly installment of 50% of a deceased trustee's retirement benefits for the
same length of time that the trustee would have received based on his or her
service. A trustee must have attained the age of 65 (55 in the event of death or
disability) to receive any retirement benefit.
Deferred Compensation Agreements
Messrs. Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for purposes of this paragraph only, the "Deferring Trustees") have each executed a Deferred Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees have the option to elect to defer receipt of up to 100% of their compensation payable by the Trust, and such amounts are placed into a deferral account. Currently, the Deferring Trustees have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested. Distributions from the Deferring Trustees' deferral accounts will be paid in cash, generally in equal quarterly installments over a period of up to ten (10) years (depending on the Compensation Agreement) beginning on the date selected under the Compensation Agreement. The Trust's Board of Trustees, in its sole discretion, may accelerate or extend the distribution of such deferral accounts after the Deferring Trustee's retirement benefits commence under the Plan. The Board, in its sole discretion, also may accelerate or extend the distribution of such deferral accounts after the Deferring Trustee's termination of service as a trustee of the Trust. If a Deferring Trustee dies prior to the distribution of amounts in his or her deferral account, the balance of the deferral account will be distributed to his or her designated
beneficiary. The Compensation Agreements are not funded and, with respect to the payments of amounts held in the deferral accounts, the Deferring Trustees have the status of unsecured creditors of the Trust and of each other AIM Fund from which they are deferring compensation.
Purchases of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase Class A shares of the Funds without paying an initial sales charge. AIM Distributors permits such purchases because there is a reduced sales effort involved in sales to such purchasers, thereby resulting in relatively low expenses of distribution.
CODES OF ETHICS
AIM, the Trust A I M Distributors, Inc. ("AIM Distributors") and A I M Capital Management, Inc. (the "Sub-Advisor") have each adopted a Code of Ethics governing, as applicable, personal trading activities of all directors/trustees, officers of the Trust, persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by any of the Funds or obtain information pertaining to such purchase or sale, and certain other employees. The Codes of Ethics are intended to prohibit conflicts of interest with the Trust that may arise from personal trading. Personal trading, including personal trading involving securities that may be purchased or held by a Fund, is permitted by persons covered under the relevant Codes subject to certain restrictions; however those persons are generally required to pre-clear all security transactions with the Compliance Officer or his designee and to report all transactions on a regular basis.
PROXY VOTING POLICIES
The Board of Trustees of the Trust has delegated responsibility for decisions regarding proxy voting for securities held by each Fund to the Fund's investment advisor. The investment advisor will vote such proxies in accordance with its proxy policies and procedures, which have been reviewed by the Board of Trustees, and which are found in Appendix D.
Any material changes to the proxy policies and procedures will be submitted to the Board of Trustees of the Trust for approval. The Board of Trustees will be supplied with a summary quarterly report of each Fund's proxy voting record.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information about the ownership of each class of each Fund's shares by beneficial or record owners of such Fund and by trustees and officers as a group is found in Appendix E. A shareholder who owns beneficially 25% or more of the outstanding shares of a Fund is presumed to "control" that Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
AIM, the Funds' investment advisor, was organized in 1976, and along with its subsidiaries, manages or advises over 200 investment portfolios encompassing a broad range of investment objectives. AIM is a direct, wholly owned subsidiary of AIM Management, a holding company that has been engaged in the financial services business since 1976. AIM Management is an indirect, wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent global investment management group. Certain of the directors and officers of AIM are also executive officers of the Trust and their affiliations are shown under "Management Information" herein.
As investment advisor, AIM supervises all aspects of the Funds' operations and provides investment advisory services to the Funds. AIM obtains and evaluates economic, statistical and financial information to formulate and implement investment programs for the Funds. The Master Investment Advisory Agreement provides that, in fulfilling its responsibilities, AIM may engage the services of other investment managers with respect to one or more of the Funds. The investment advisory services of AIM and the investment sub-advisory services of the sub-advisor(s) to the Funds are not exclusive and AIM and the sub-advisor(s) are free to render investment advisory services to others, including other investment companies.
AIM is also responsible for furnishing to the Funds, at AIM's expense, the services of persons believes to be competent to perform all supervisory and administrative services required by the Funds, in the judgment of the trustees, to conduct their respective businesses effectively, as well as the offices, equipment and other facilities necessary for their operations. Such functions include the maintenance of each Fund's accounts and records, and the preparation of all requisite corporate documents such as tax returns and reports to the SEC and shareholders.
The Master Investment Advisory Agreement provides that each Fund will pay or cause to be paid all expenses of such Fund not assumed by AIM, including, without limitation: brokerage commissions, taxes, legal, auditing or governmental fees, custodian, transfer and shareholder service agent costs, expenses of issue, sale, redemption, and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to trustees and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Trust on behalf of each Fund in connection with membership in investment company organizations, and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders.
AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares.
Pursuant to its advisory agreement with the Trust, AIM receives a monthly fee from each Fund calculated at the following annual rates, based on the average daily net assets of each Fund during the year:
FUND NAME NET ASSETS ANNUAL RATE
--------- ---------- -----------
AIM Aggressive Growth Fund First $150 million 0.80%
Amount over $150 million 0.625%
AIM Blue Chip Fund* First $350 million 0.75%
AIM Capital Development Fund Amount over $350 million 0.625%
AIM Charter Fund* First $30 million 1.00%
AIM Constellation Fund* Next $120 million 0.75%
Amount over $150 million 0.625%
AIM Large Cap Basic Value Fund First $1 billion 0.60%
Over $1 billion to and including
$2 billion 0.575%
Over $2 billion 0.55%
AIM Large Cap Growth Fund First $1 billion 0.75
Over $1 billion to and including
$2 billion 0.70%
Over $2 billion 0.625%
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FUND NAME NET ASSETS ANNUAL RATE
--------- ---------- -----------
AIM Mid Cap Growth Fund First $1 billion 0.80%
Over $1 billion 0.75%
AIM Weingarten Fund*
First $30 million 1.00%
Next $320 million 0.75%
Amount over $350 million 0.625%
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* See currently effective fee disclosure below.
AIM has voluntarily agreed to waive advisory fees payable by AIM Constellation Fund in an amount equal to 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum waiver of 0.175% on net assets in excess of $35 billion.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
AIM has voluntarily agreed to waive a portion of advisory fees payable by each Fund. The amount of the waiver will equal 25% of the advisory fee AIM receives from the Affiliated Money Market Funds as a result of each Fund's Investment of uninvested cash in an Affiliated Money Market Fund. Termination of this agreement requires approval by the Board of Trustees. See "Description of the Funds and Their Investments and Risks - "Investment Strategies and Risks - Other Investments - Other Investment Companies."
INVESTMENT SUB-ADVISOR
AIM has entered into a Master Sub-Advisory Contract with A I M Capital Management, Inc. ("AIM Capital") to provide investment sub-advisory services to AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund. AIM Capital is registered as an investment advisor under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). AIM Capital is a wholly owned subsidiary of AIM.
For the services to be rendered by AIM Capital under its Master Sub-Advisory Contract, AIM will pay to AIM Capital a fee which will be computed daily and paid as of the last day of each month on the basis of each Fund's daily net asset value, using for each daily calculation the most recently determined net asset value of the Fund. (See "Computation of Net Asset Value.") On an annual basis, the sub-advisory fee is equal to 50% of AIM's compensation of the sub-advised assets per year, for each of the AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund.
The management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund for the last three fiscal years ended October 31 are found in Appendix F.
SECURITIES LENDING ARRANGEMENTS. If a Fund engages in securities lending, AIM will provide the Fund investment advisory services and related administrative services. The advisory agreement describes the administrative services to be rendered by AIM if a Fund engages in securities lending activities, as well as the compensation AIM may receive for such administrative services. Services to be provided include: (a) overseeing participation in the securities lending program to ensure compliance with all applicable regulatory and investment guidelines; (b) assisting the securities lending agent or principal (the agent) in determining which specific securities are available for loan; (c) monitoring the agent to ensure that securities loans are effected in accordance with AIM's instructions and with procedures adopted by the Board; (d) preparing appropriate periodic reports for, and seeking appropriate approvals from, the Board with respect to securities lending activities; (e) responding to agent inquiries; and (f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with securities lending is included in the advisory fee schedule. As compensation for the related administrative services AIM will provide, a lending Fund will pay AIM a fee equal to 25% of the net monthly interest or fee income retained or paid to the Fund from such activities. AIM currently intends to waive such fee, and has agreed to seek Board approval prior to its receipt of all or a portion of such fee.
SERVICE AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a Master Administrative Services Agreement ("Administrative Services Agreement") pursuant to which AIM may perform or arrange for the provision of certain accounting and other administrative services to each Fund which are not required to be performed by AIM under the advisory agreement. The Administrative Services Agreement provides that it will remain in effect and continue from year to year only if such continuance is specifically approved at least annually by the Trust's Board of Trustees, including the independent trustees, by votes cast in person at a meeting called for such purpose. Under the Administrative Services Agreement, AIM is entitled to receive from the Funds reimbursement of its costs or such reasonable compensation as may be approved by the Board of Trustees. Currently, AIM is reimbursed for the services of the Trust's principal financial officer and her staff, and any expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three fiscal years ended October 31 are found in Appendix G.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc., formerly A I M Fund Services, Inc., ("AIS"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a registered transfer agent and wholly owned subsidiary of AIM, acts as transfer and dividend disbursing agent for the Funds.
The Transfer Agency and Service Agreement between the Trust and AIS provides that AIS will perform certain shareholder services for the Funds. The Transfer Agency and Service Agreement provides that AIS will receive a per account fee plus out-of-pocket expenses to process orders for purchases, redemptions and exchanges of shares; prepare and transmit payments for dividends and distributions declared by the Funds; maintain shareholder accounts and provide shareholders with information regarding the Funds and their accounts. AIS may impose certain copying charges for requests for copies of shareholder account statements and other historical account information older than the current year and the immediately preceding year.
It is anticipated that most investors will perform their own subaccounting.
CUSTODIAN. State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and cash of the Funds. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as sub-custodian for purchases of shares of the Funds. The Bank of New York, 100 Church Street, New York, New York 10286, also serves as sub-custodian to facilitate cash management.
The Custodian is authorized to establish separate accounts in foreign countries and to cause foreign securities owned by the Funds to be held outside the United States in branches of U.S. banks and, to the extent permitted by applicable regulations, in certain foreign banks and securities depositories. AIM is responsible for selecting eligible foreign securities depositories and for assessing the risks associated with investing in foreign countries, including the risk of using eligible foreign securities depositories in a country. The Custodian is responsible for monitoring eligible foreign securities depositories.
Under its contract with the Trust, the Custodian maintains the portfolio securities of the Funds, administers the purchases and sales of portfolio securities, collects interest and dividends and other distributions made on the securities held in the portfolios of the Funds and performs other ministerial duties. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets.
AUDITORS. The Funds' independent public accountants are responsible for auditing the financial statements of the Funds. The Board of Trustees has selected Ernst & Young LLP, 1401 McKinney, Suite 1200, Houston, Texas 77010, as the independent public accountants to audit the financial statements of the Funds.
COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, the Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM and/or the Sub-Advisor makes decisions to buy and sell securities for each Fund, selects broker-dealers, effects the Funds' investment portfolio transactions, allocates brokerage fees in such transactions and, where applicable, negotiates commissions and spreads on transactions. AIM's primary consideration in effecting a security transaction is to obtain the most favorable execution of the order, which includes the best price on the security and a low commission rate. While AIM seeks reasonably competitive commission rates, the Funds may not pay the lowest commission or spread available. See "Brokerage Selection" below.
Some of the securities in which the Funds invest are traded in over-the-counter markets. Portfolio transactions placed in such markets may be effected at either net prices without commissions, but which include compensation to the broker-dealer in the form of a mark up or mark down, or on an agency basis, which involves the payment of negotiated brokerage commissions to the broker-dealer, including electronic communication networks.
Traditionally, commission rates have not been negotiated on stock markets outside the United States. Although in recent years many overseas stock markets have adopted a system of negotiated rates, a number of markets maintain an established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds during the last three fiscal years ended October 31, 2001 are found in Appendix H.
COMMISSIONS
During the last three fiscal years ended October 31, none of the Funds paid brokerage commissions to brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities.
The Funds may engage in certain principal and agency transactions with banks and their affiliates that own 5% or more of the outstanding voting securities of an AIM Fund, provided the conditions of an exemptive order received by the AIM Funds from the SEC are met. In addition, a Fund may purchase or sell a security from or to certain other AIM Funds or accounts (and may invest in Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards of Trustees of the various AIM Funds, including the Trust. These inter-fund transactions do not generate brokerage commissions but may result in custodial fees or taxes or other related expenses.
BROKERAGE SELECTION
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM, under certain circumstances, lawfully may cause an account to pay a higher commission than the lowest available. Under Section 28(e)(1), AIM must make a good faith determination that the commissions paid are "reasonable in relation to the value of the brokerage and research services provided ... viewed in terms of either that particular transaction or [AIM's] overall responsibilities with respect to the accounts as to which [it] exercises investment discretion." The services provided by the broker also must lawfully and appropriately assist AIM in the performance of its investment decision-making responsibilities. Accordingly, in recognition of research services provided to it, a Fund may pay a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own research (and the research of its affiliates), and may include the following types of information: statistical and background information on the U.S. and foreign economies, industry groups and individual companies; forecasts and interpretations with respect to the U.S. and foreign economies, securities, markets, specific industry groups and individual companies; information on federal, state, local and foreign political developments; portfolio management strategies; performance information on securities, indexes and investment accounts; information concerning prices of securities; and information supplied by specialized services to AIM and to the Trust's trustees with respect to the performance, investment activities, and fees and expenses of other mutual funds. Broker-dealers may communicate such information electronically, orally, in written form or on computer software. Research services may also include providing electronic communications of trade information, providing custody services, as well as providing equipment used to communicate research information and providing specialized consultations with AIM personnel with respect to computerized systems and data furnished to AIM as a component of other research services, arranging meetings with management of companies, and providing access to consultants who supply research information.
The outside research assistance is useful to AIM since the broker-dealers used by AIM tend to follow a broader universe of securities and other matters than AIM's staff can follow. In addition, the research provides AIM with a diverse perspective on financial markets. Research services provided to AIM by broker-dealers are available for the benefit of all accounts managed or advised by AIM or by its affiliates. Some broker-dealers may indicate that the provision of research services is dependent upon the generation of certain specified levels of commissions and underwriting concessions by AIM's clients, including the Funds. However, the Funds are not under any obligation to deal with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the broker-dealer providing them. In other cases, the research services may be obtainable from alternative sources in return for cash payments. AIM believes that the research services are beneficial in supplementing AIM's research and analysis and that they improve the quality of AIM's investment advice. The advisory fee paid by the Funds is not reduced because AIM receives such services. However, to the extent that AIM would have purchased research services had they not been provided by broker-dealers, the expenses to AIM could be considered to have been reduced accordingly.
AIM may determine target levels of commission business with various brokers on behalf of its clients (including the Funds) over a certain time period. The target levels will be based upon the following factors, among others: (1) the execution services provided by the broker; and (2) the research services provided by the broker. AIM will not use a specific formula in connection with any of these considerations to determine the target levels.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the last fiscal year ended October 31, 2003 are found in Appendix I.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their regular brokers or dealers during the last fiscal year ended October 31, 2003 is found in Appendix I.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some of these accounts may have investment objectives similar to the Funds. Occasionally, identical securities will be appropriate for investment by one of the Funds and by another Fund or one or more of these investment accounts. However, the position of each account in the same securities and the length of time that each account may hold its investment in the same securities may vary. The timing and amount of purchase by each account will also be determined by its cash position. If the purchase or sale of securities is consistent with the investment policies of the Fund(s) and one or more of these accounts, and is considered at or about the same time, AIM will fairly allocate transactions in such securities among the Fund(s) and these accounts. AIM may combine such transactions, in accordance with applicable laws and regulations, to obtain the most favorable execution. Simultaneous transactions could, however, adversely affect a Fund's ability to obtain or dispose of the full amount of a security which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the various investment accounts advised by AIM results in transactions which could have an adverse effect on the price or amount of securities available to a Fund. In making such allocations, AIM considers the investment objectives and policies of its advisory clients, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held, and the judgments of the persons responsible for recommending the investment. This procedure would apply to transactions in both equity and fixed income securities.
ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in IPOs. Purchases of IPOs by one AIM Fund or account may also be considered for purchase by one or more other AIM Funds or accounts. It shall be AIM's practice to specifically combine or otherwise bunch indications of interest for IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO, and to allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks to participate in a particular IPO by reviewing a number of factors, including suitability of the investment with the AIM Fund's or account's investment objective, policies and strategies, the liquidity of the AIM Fund or account if such investment is purchased, and whether the portfolio manager intends to hold the security as a long-term investment. The allocation of securities issued in IPOs will be made to eligible AIM Funds and accounts in a manner designed to be fair and equitable for the eligible AIM Funds and accounts, and so that there is equal allocation of IPOs over the longer term. Where multiple funds or accounts are eligible, rotational participation may occur, based on the extent to which an AIM Fund or account has participated in previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM Fund and account will be placed in one of four tiers, depending upon each AIM Fund's or account's asset level. The AIM Funds and accounts in the tier containing funds and accounts with the smallest asset levels will participate first, each receiving a 40 basis point allocation (rounded to the nearest share round lot that approximates 40 basis points) (the "Allocation"), based on that AIM Fund's or account's net assets. This process continues until all of the AIM Funds and accounts in the four tiers receive their Allocations, or until the shares are all allocated. Should securities remain after this process, eligible AIM Funds and accounts will receive their Allocations on a straight pro rata basis. In addition, Incubator Funds, as described in AIM's Incubator and New Fund Investment Policy, and any other AIM Fund which has more than 5% of its outstanding shares owned by AIM or one of its affiliates, officers, directors or employees, will each be limited to a 40 basis
point allocation only. Such allocations will be allocated to the nearest share round lot that approximates 40 basis points.
When any AIM Funds and/or accounts with substantially identical investment objectives and policies participate in IPOs, they will do so in amounts that are substantially proportionate to each other. In these cases, the net assets of the largest participating AIM Fund will be used to determine in which tier, as described in the paragraph above, such group of AIM Funds or accounts will be placed. If no AIM Fund is participating, then the net assets of the largest account will be used to determine tier placement. The price per share of securities purchased in such IPO transactions will be the same for each AIM Fund and account.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE AND REDEMPTION OF SHARES
Before the initial purchase of shares, an investor must submit a completed account application to his financial intermediary, who should forward the application to AIM Investment Services, Inc. at P.O. Box 4497, Houston, Texas 77210-4497. An investor may change information in his account application by submitting written changes or a new account application to his intermediary or to AIS.
Purchase and redemption orders must be received in good order. To be in good order, the financial intermediary must give AIS all required information and documentation with respect to the investor. If the intermediary fails to deliver the investor's payment on the required settlement date, the intermediary must reimburse the Fund for any overdraft charges incurred.
A financial intermediary may submit a written request to AIS for correction of transactions involving Fund shares. If AIS agrees to correct a transaction, and the correction requires a dividend adjustment, the intermediary must agree in writing to reimburse the Fund for any resulting loss.
An investor may terminate his relationship with an intermediary and become the shareholder of record on his account. However, until the investor establishes a relationship with an intermediary, the investor will not be able to purchase additional shares of the Fund, except through the reinvestment of distributions.
Payment for redeemed shares is normally made by Federal Reserve wire to the bank account designated in the investor's account application, but may be sent by check at the investor's request. By providing written notice to his financial intermediary or to AIS, an investor may change the bank account designated to receive redemption proceeds. AIS may request additional documentation.
AIS may request that an intermediary maintain separate master accounts in the Fund for shares held by the intermediary (a) for its own account, for the account of other institutions and for accounts for which the intermediary acts as a fiduciary; and (b) for accounts for which the intermediary acts in some other capacity. An intermediary may aggregate its master accounts and subaccounts to satisfy the minimum investment requirement.
Platform sponsors that provide investment vehicles to fund Section 401 defined contribution plans and have entered into written agreements with AIM Distributors to waive applicable investment minimums may purchase Institutional Class shares for accounts within such plans.
REDEMPTIONS BY THE FUNDS
If the Funds determine that you have provided incorrect information in opening an account or in the course of conducting subsequent transactions, the Funds may, at their discretion, redeem the account and distribute the proceeds to you.
Additional information regarding purchases and redemptions is located in the Funds' prospectus, under the headings "Purchasing Shares" and "Redeeming Shares."
ABANDONED PROPERTY. It is the responsibility of the investor to ensure that AIS maintains a correct address for his account(s). An incorrect address may cause an investor's account statements and other mailings to be returned to AIS. Upon receiving returned mail, AIS will attempt to locate the investor or rightful owner of the account. If unsuccessful, AIS will retain a shareholder locator service with a national information database to conduct periodic searches for the investor. If the search firm is unable to locate the investor, the search firm will determine whether the investor's account has legally been abandoned. AIS is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction.
OFFERING PRICE
Shares of the Institutional Class of a Fund are sold at net asset value.
Calculation of Net Asset Value
Each Fund determines its net asset value per share once daily as of the close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, each Fund determines its net asset value per share as of the close of the NYSE on such day. For purposes of determining net asset value per share, the Fund will generally use futures and options contract closing prices which are available fifteen (15) minutes after the close of the customary trading session of the NYSE. The Funds determine net asset value per share by dividing the value of a Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all its liabilities (including accrued expenses and dividends payable) attributable to that class, by the total number of shares outstanding of that class. Determination of a Fund's net asset value per share is made in accordance with generally accepted accounting principles.
Each security (excluding convertible bonds) held by a Fund 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 closing bid price on that day. Each security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") or absent a NOCP, at the closing bid price on that day; option contracts are valued at the mean between the closing bid and asked prices on the exchange where the contracts are principally traded; futures contracts are valued at final settlement price quotations from the primary exchange on which they are traded. Debt securities (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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data.
Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and ask prices. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities, is substantially completed each day at various times
prior to the close of the NYSE. The values of such securities used in computing the net asset value of each Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of a Fund's net asset value. If a development/event is so significant such that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures, and exchange-traded funds.
Fund securities primarily traded in foreign markets may be traded in such markets on days which are not business days of the Fund. Because the net asset value per share of each Fund is determined only on business days of the Fund, the net asset value per share of a Fund may be significantly affected on days when an investor cannot exchange or redeem shares of the Fund.
REDEMPTION IN KIND
AIM intends to redeem all shares of the Funds in cash. It is possible that future conditions may make it undesirable for a Fund to pay for redeemed shares in cash. In such cases, the Fund may make payment in securities or other property. If a Fund has made an election under Rule 18f-1 under the 1940 Act, the Fund is obligated to redeem for cash all shares presented to such Fund for redemption by any one shareholder in an amount up to the lesser of $250,000 or 1% of that Fund's net assets in any 90-day period. Securities delivered in payment of redemptions are valued at the same value assigned to them in computing the applicable Fund's net asset value per share. Shareholders receiving such securities are likely to incur brokerage costs on their subsequent sales of such securities.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for non-resident aliens) or Form W-9 (certifying exempt status) accompanying the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, generally must withhold 28% of redemption payments and reportable dividends (whether paid or accrued) in the case of any shareholder who fails to provide the Fund with a taxpayer identification number ("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect TIN;
3. the investor or the Fund is notified by the IRS that the investor is subject to backup withholding because the investor failed to report all of the interest and dividends on such investor's tax return (for reportable interest and dividends only);
4. the investor fails to certify to the Fund that the investor is not subject to backup withholding under (3) above (for reportable interest and dividend accounts opened after 1983 only); or
5. the investor does not certify his TIN. This applies only to non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all five situations discussed above. Redemption proceeds and long-term gain distributions are subject to backup withholding only if (1), (2) or (5) above applies.
Certain payees and payments are exempt from backup withholding and information reporting. AIM or AIS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning withholding.
IRS PENALTIES - Investors who do not supply the AIM Funds with a correct TIN will be subject to a $50 penalty imposed by the IRS unless such failure is due to reasonable cause and not willful neglect. If an investor falsifies information on this form or makes any other false statement resulting in no backup withholding on an account which should be subject to backup withholding, such investor may be subject to a $500 penalty imposed by the IRS and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities are not subject to the backup withholding previously discussed, but must certify their foreign status by attaching IRS Form W-8 to their application. Form W-8 generally remains in effect for a period starting on the date the Form is signed and ending on the last day of the third succeeding calendar year. Such shareholders may, however, be subject to federal income tax withholding at a 30% rate on ordinary income dividends and other distributions. Under applicable treaty law, residents of treaty countries may qualify for a reduced rate of withholding or a withholding exemption.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare and pay annually net investment income dividends and capital gain distributions. It is each Fund's intention to distribute substantially all of its net investment income and realized net capital gain. In determining the amount of capital gains, if any, available for distribution, capital gains will be offset against available net capital loss, if any, carried forward from previous fiscal periods. All dividends and distributions will be automatically reinvested in additional shares of the same class of each Fund unless the shareholder has requested in writing to receive such dividends and distributions in cash or that they be invested in Institutional Class shares of another AIM Fund, subject to the terms and conditions set forth in the Prospectus under the caption "Special Plans - Automatic Dividend Investment." Such dividends and distributions will be reinvested at the net asset value per share determined on the ex-dividend date. If a shareholder's account does not have any shares in it on a dividend or capital gain distribution payment date, the dividend or distribution will be paid in cash whether or not the shareholder has elected to have such dividends or distributions reinvested.
Distributions paid by a Fund, other than daily dividends, have the effect of reducing the net asset value per share on the ex-dividend date by the amount of the dividend or distribution. Therefore, a dividend or distribution declared shortly after a purchase of shares by an investor would represent, in substance, a return of capital to the shareholder with respect to such shares even though it would be subject to income tax.
TAX MATTERS
The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of each Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to be taxed under Subchapter M of the Code as a regulated investment company and intends to maintain its qualification as such in each of its taxable years. As a regulated investment company, each Fund is not subject to federal income tax on the portion of its net investment income (i.e., taxable interest, dividends and other taxable ordinary income, net of expenses) and capital gain net income (i.e., the excess of capital gains over capital losses) that it distributes to shareholders, provided that it distributes an amount equal to (i) at least 90% of its investment company taxable income (i.e., net investment income, net foreign currency ordinary gain or loss and the excess of net short-term capital gain over net long-term capital loss) and (ii) at least 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2) for the taxable year (the "Distribution Requirement"), and satisfies certain other requirements of the Code that are described below. Distributions by a Fund made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year, will be considered distributions of income and gain of the taxable year and can therefore satisfy the Distribution Requirement.
Each Fund may use "equalization accounting" in determining the portion of its net investment income and capital gain net income that has been distributed. A Fund that elects to use equalization accounting will allocate a portion of its realized investment income and capital gain to redemptions of Fund shares and will reduce the amount of such income and gain that it distributes in cash. However, each Fund intends to make cash distributions for each taxable year in an aggregate amount that is sufficient to satisfy the Distribution Requirement without taking into account its use of equalization accounting. The Internal Revenue Service has not published any guidance concerning the methods to be used in allocating investment income and capital gain to redemptions of shares. In the event that the Internal Revenue Service determines that a Fund is using an improper method of allocation and has underdistributed its net investment income and capital gain net income for any taxable year, such Fund may be liable for additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock, securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gain from options, futures or forward contracts)
derived from its business of investing in such stock, securities or currencies
(the "Income Requirement"). Under certain circumstances, a Fund may be required
to sell portfolio holdings to meet this requirement.
In addition to satisfying the requirements described above, each Fund must satisfy an asset diversification test in order to qualify as a regulated investment company (the "Asset Diversification Test"). Under this test, at the close of each quarter of each Fund's taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. Government securities, securities of other regulated investment companies, and securities of other issuers, as to which the Fund has not invested more than 5% of the value of the Fund's total assets in securities of such issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of such issuer, and no more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies), or in two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses.
For purposes of the Asset Diversification Test, the IRS has ruled that the issuer of a purchased listed call option on stock is the issuer of the stock underlying the option. The IRS has also informally ruled that, in general, the issuers of purchased or written call and put options on securities, of long and short positions on futures contracts on securities and of options on such future contracts are the issuers of the securities underlying such financial instruments where the instruments are traded on an exchange.
Where the writer of a listed call option owns the underlying securities, the IRS has ruled that the Asset Diversification Test will be applied solely to such securities and not to the value of the option itself. With respect to options on securities indexes, futures contracts on securities indexes and options on such
futures contracts, the IRS has informally ruled that the issuers of such options and futures contracts are the separate entities whose securities are listed on the index, in proportion to the weighing of securities in the computation of the index. It is unclear under present law who should be treated as the issuer of forward foreign currency exchange contracts, of options on foreign currencies, or of foreign currency futures and related options. It has been suggested that the issuer in each case may be the foreign central bank or the foreign government backing the particular currency. Due to this uncertainty and because the Funds may not rely on informal rulings of the IRS, the Funds may find it necessary to seek a ruling from the IRS as to the application of the Asset Diversification Test to certain of the foregoing types of financial instruments or to limit its holdings of some or all such instruments in order to stay within the limits of such test.
If for any taxable year a Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable as ordinary dividends to the extent of such Fund's current and accumulated earnings and profits. Such distributions generally will be eligible for the dividends received deduction (to the extent discussed below) in the case of corporate shareholders and will be included in the qualified dividend income of noncorporate shareholders. See "Fund Distributions" below.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY. In general, gain or loss recognized by a Fund on the disposition of an asset will be a capital gain or loss. However, gain recognized on the disposition of a debt obligation purchased by a Fund at a market discount (generally, at a price less than its principal amount) will be treated as ordinary income to the extent of the portion of the market discount which accrued during the period of time the Fund held the debt obligation unless the Fund made an election to accrue market discount into income. If a Fund purchases a debt obligation that was originally issued at a discount, the Fund is generally required to include in gross income each year the portion of the original issue discount which accrues during such year. In addition, under the rules of Code Section 988, gain or loss recognized on the disposition of a debt obligation denominated in a foreign currency or an option with respect thereto (but only to the extent attributable to changes in foreign currency exchange rates), and gain or loss recognized on the disposition of a foreign currency forward contract or of foreign currency itself, will generally be treated as ordinary income or loss (except in certain cases for which an election is made to treat gain/loss as capital.)
Certain hedging transactions that may be engaged in by certain of the Funds (such as short sales "against the box") may be subject to special tax treatment as "constructive sales" under Section 1259 of the Code if a Fund holds certain "appreciated financial positions" (defined generally as any interest (including a futures or forward contract, short sale or option) with respect to stock, certain debt instruments, or partnership interests if there would be a gain were such interest sold, assigned, or otherwise terminated at its fair market value). Upon entering into a constructive sales transaction with respect to an appreciated financial position, a Fund will generally be deemed to have constructively sold such appreciated financial position and will recognize gain as if such position were sold, assigned, or otherwise terminated at its fair market value on the date of such constructive sale (and will take into account any gain for the taxable year which includes such date).
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into will be subject to
special tax treatment as "Section 1256 contracts." Section 1256 contracts that a
Fund holds are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end deemed disposition of
Section 1256 contracts is combined with any other gain or loss that was
previously recognized upon the termination of Section 1256 contracts during that
taxable year. The net amount of such gain or loss for the entire taxable year
(including gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is deemed to be 60% long-term and 40% short-term gain or loss.
However, in the case of Section 1256 contracts that are forward foreign currency
exchange contracts, the net gain or loss is separately determined and (as
discussed above) generally treated as ordinary income or loss. If such a
future or option is held as an offsetting position and can be considered a straddle under Section 1092 of the Code, such a straddle will constitute a mixed straddle. A mixed straddle will be subject to both Section 1256 and Section 1092 unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in "straddles" or "conversion transactions" for U.S. federal income tax purposes. The straddle and conversion transaction rules may affect the character of gains (or in the case of the straddle rules, losses) realized by the Funds. In addition, losses realized by the Funds on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules and the conversion transaction rules have been promulgated, the tax consequences to the Funds of hedging transactions are not entirely clear. The hedging transactions may increase the amount of short-term capital gain realized by the Funds (and, if they are conversion transactions, the amount of ordinary income) which is taxed as ordinary income when distributed to shareholders.
Because application of any of the foregoing rules governing Section 1256 contracts, constructive sales, straddle and conversion transactions may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected investment or straddle positions, the taxable income of a Fund may exceed its book income. Accordingly, the amount which must be distributed to shareholders and which will be taxed to shareholders as ordinary income or long-term capital gain may also differ from the book income of the Fund and may be increased or decreased as compared to a fund that did not engage in such transactions.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible excise tax is imposed on a regulated investment company that fails to distribute in each calendar year an amount equal to 98% of ordinary taxable income for the calendar year and 98% of capital gain net income (excess of capital gains over capital losses) for the one-year period ended on October 31 of such calendar year (or, at the election of a regulated investment company having a taxable year ending November 30 or December 31, for its taxable year (a "taxable year election")). The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a regulated investment company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (2) exclude
Section 988 foreign currency gains and losses incurred after October 31 (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
Each Fund generally intends to make sufficient distributions or deemed distributions of its ordinary taxable income and capital gain net income prior to the end of each calendar year to avoid liability for the excise tax. However, in the event that the Internal Revenue Service determines that a Fund is using an improper method of allocation for purposes of equalization accounting (as discussed above), such Fund may be liable for excise tax. Moreover, investors should note that a Fund may in certain circumstances be required to liquidate portfolio investments to make sufficient distributions to avoid excise tax liability. In addition, under certain circumstances, a Fund may elect to pay a minimal amount of excise tax.
PFIC INVESTMENTS. Those Funds that are permitted to invest in foreign equity securities may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income.
The application of the PFIC rules may affect, among other things, the character of gain, the amount of gain or loss and the timing of the recognition and character of income with respect to PFIC
stock, as well as subject the Funds themselves to tax on certain income from PFIC stock. For these reasons the amount that must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC stock.
SWAP AGREEMENTS. Each Fund may enter into swap agreements. The rules governing the tax aspects of swap agreements are in a developing stage and are not entirely clear in certain respects. Accordingly, while a Fund intends to account for such transactions in a manner deemed to be appropriate, the IRS might not accept such treatment. If it did not, the status of a Fund as a regulated investment company might be affected. Each Fund intends to monitor developments in this area. Certain requirements that must be met under the Code in order for a Fund to qualify as a regulated investment company may limit the extent to which a Fund will be able to engage in swap agreements.
FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all of its investment company taxable income for each taxable year. Such distributions will be taxable to shareholders as ordinary income and treated as dividends for federal income tax purposes, but they will qualify for the 70% dividends received deduction for corporations and as qualified dividend income for individuals and other non-corporate taxpayers to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital gain (net long-term capital gain over net short-term capital loss) for each taxable year. Each Fund currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will be taxable to shareholders as long-term capital gain (currently taxable at a maximum rate of 15% for noncorporate shareholders) regardless of the length of time the shareholder has held his shares or whether such gain was recognized by the Fund prior to the date on which the shareholder acquired his shares. However, certain capital gain dividends distributed to noncorporate shareholders for the Fund's fiscal year ending October 31, 2003 may be taxable at a maximum rate of 20%. Conversely, if a Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carry forwards) at the 35% corporate tax rate. If a Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by a Fund with respect to a taxable year will qualify for the 70% dividends received deduction generally available to corporations (other than corporations, such as "S" corporations, which are not eligible for the deduction because of their special characteristics and other than for purposes of special taxes such as the accumulated earnings tax and the personal holding company tax) to the extent of the amount of qualifying dividends received by the Fund from domestic corporations for the taxable year. However, the alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction.
Ordinary income dividends paid by a Fund to individuals and other noncorporate taxpayers will be treated as qualified dividend income that is subject to tax at a maximum rate of 15% to the extent of the amount of qualifying dividends received by the Fund from domestic corporations and from foreign corporations that are either incorporated in a possession of the United States, or are eligible for benefits under certain income tax treaties with the United States that include an exchange of information program. In addition, qualifying dividends include dividends paid with respect to stock of a foreign corporation that is readily tradable on an established securities market in the United States. However, dividends received by the Fund from foreign personal holding companies, foreign investment companies or PFICs are not qualifying dividends. If the qualifying dividend income received by a Fund is equal to 95% (or a greater percentage) of the Fund's gross income (exclusive of net capital gain) in any taxable year, all of the ordinary income dividends paid by the Fund will be qualifying dividend income.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the extent it exceeds, the regular tax and is computed at a maximum rate of 28% for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount. However, the AMT on capital gain dividends and qualified dividend income paid by a Fund to a noncorporate shareholder may not exceed a maximum rate of 15%. The corporate dividends received deduction is not itself an item of tax preference that must be added back to taxable income or is otherwise disallowed in determining a corporation's AMTI. However, corporate shareholders will generally be required to take the full amount of any dividend received from the Fund into account (without a dividend received deduction) in determining their adjusted current earnings, which are used in computing an additional corporate preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings over its AMTI (determined without regard to this item and the AMTI net operating loss deduction)) that is includable in AMTI. However, certain small corporations are wholly exempt from the AMT.
Distributions by a Fund that do not constitute earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares.
Distributions by a Fund will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another Fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Ordinarily, shareholders are required to take distributions by a Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost as a result of a distribution by a Fund, such distribution generally will be taxable even though it represents a return of invested capital. Investors should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution. The price of shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a distribution which generally will be taxable to them.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on the sale or redemption of shares of a Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. All or a portion of any loss so recognized may be deferred under the wash sale rules if the shareholder purchases other shares of the Fund within 30 days before or after the sale or redemption. In general, any gain or loss arising from (or treated as arising from) the sale or redemption of shares of a Fund will be considered capital gain or loss and will be long-term capital gain or loss if the shares were held for longer than one year. Currently, any long-term capital gain recognized by a non-corporate shareholder will be subject to tax at a maximum rate of 15%. However, any capital loss arising from the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable distributions and/or redemption payments. For more information refer to "Purchase, Redemption and Pricing of Shares - Backup Withholding".
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions (other than distributions of long-term capital gain) will be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the distribution. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gain realized on the redemption of shares of a Fund, capital gain dividends and amounts retained by a Fund that are designated as undistributed net capital gain.
If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale or redemption of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be required to withhold U.S. federal income tax at a rate of 28% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status.
Foreign shareholders may be subject to U.S. withholding tax at a rate of 30% on the income resulting from a Fund's election to treat any foreign income tax paid by it as paid by its shareholders, but may not be able to claim a credit or deduction with respect to the withholding tax for the foreign tax treated as having been paid by them.
Foreign persons who file a United States tax return to obtain a U.S. tax refund and who are not eligible to obtain a social security number must apply to the IRS for an individual taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying instructions, please contact your tax advisor or the IRS.
Transfers by gift of shares of a Fund by a foreign shareholder who is a nonresident alien individual will not be subject to U.S. federal gift tax. An individual who, at the time of death, is a foreign shareholder will nevertheless be subject to U.S. federal estate tax with respect to shares at the graduated rates applicable to U.S. citizens and residents, unless a treaty exception applies. In the absence of a treaty, there is a $13,000 statutory estate tax credit.
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Fund, including the applicability of foreign tax.
FOREIGN INCOME TAX. Investment income received by each Fund from sources within foreign countries may be subject to foreign income tax withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Funds to a reduced rate of, or exemption from, tax on such income. It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of each taxable year consists of the stock or securities of foreign corporations, the Fund may elect to "pass through" to the Fund's shareholders the amount of foreign income tax paid by the Fund (the "Foreign Tax Election"). Pursuant to the Foreign Tax Election, shareholders will be required (i) to include in gross income, even though not actually received, their respective pro-rata shares of the foreign income tax paid by the Fund that are attributable to any distributions they receive; and (ii) either to deduct their pro-rata share of foreign tax in computing their taxable income, or to use it (subject to various Code limitations) as a foreign tax credit against Federal income tax (but not both). No deduction for foreign tax may be claimed by a non-corporate shareholder who does not itemize deductions or who is subject to alternative minimum tax.
Unless certain requirements are met, a credit for foreign tax is subject to the limitation that it may not exceed the shareholder's U.S. tax (determined without regard to the availability of the credit) attributable to the shareholder's foreign source taxable income. In determining the source and character of distributions received from a Fund for this purpose, shareholders will be required to allocate Fund distributions according to the source of the income realized by the Fund. Each Fund's gain from the sale of stock and securities and certain currency fluctuation gain and loss will generally be treated as derived from U.S. sources. In addition, the limitation on the foreign tax credit is applied separately to foreign source "passive" income, such as dividend income, and the portion of foreign source income consisting of qualified dividend income is reduced by approximately 57% to account for the tax rate differential. Individuals who have no more than $300 ($600 for married persons filing jointly) of creditable foreign tax included on Form 1099 and whose foreign source income is all "qualified passive income" may elect each year to be exempt from the foreign tax credit limitation and will be able to claim a foreign tax credit without filing Form 1116 with its corresponding requirement to report income and tax by country. Moreover, no foreign tax credit will be allowable to any shareholder who has not held his shares of the Fund for at least 16 days during the 30-day period beginning 15 days before the day such shares become ex-dividend with respect to any Fund distribution to which foreign income taxes are attributed (taking into account certain holding period reduction requirements of the Code). Because of these limitations, shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing general discussion of U.S. federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on April 30, 2004. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income, qualified dividend income and capital gain dividends may differ from the rules for U.S. federal income taxation described above. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder's particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly from those summarized above. Shareholders are urged to consult their tax advisers as to the consequences of these and other state and local tax rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended, relating to the Funds (the "Distribution Agreements") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis directly and through institutions with whom AIM Distributors has entered into selected dealer agreements. AIM Distributors has not undertaken to sell any specified number of shares of any classes of the Funds.
The Trust (on behalf of the Institutional Classes) or AIM Distributors may terminate the Distribution Agreement on sixty (60) days' written notice without penalty. The Distribution Agreement will terminate automatically in the event of its assignment.
AIM Distributors may, from time to time at its expense, pay a bonus or other consideration or incentive to dealers or banks. The total amount of such additional bonus payments or other consideration
shall not exceed 0.10% of the public offering price of the shares sold or of average daily net assets of the Funds attributable to that particular dealer. At the option of the dealer, such incentives may take the form of payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives and their families to places within or outside the United States. Any such bonus or incentive programs will not change the price paid by investors for the purchase of the applicable Fund's shares or the amount that any particular Fund will receive as proceeds from such sales. Dealers may not use sales of the Funds' shares to qualify for any incentives to the extent that such incentives may be prohibited by the laws of any state.
CALCULATION OF PERFORMANCE DATA
Although performance data may be useful to prospective investors when comparing a Fund's performance with other funds and other potential investments, investors should note that the methods of computing performance of other potential investments are not necessarily comparable to the methods employed by a Fund.
Average Annual Total Return Quotation
The standard formula for calculating average annual total return is as follows:
n P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (assuming the
applicable maximum sales load is deducted at the
beginning of the one, five, or ten year periods);
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment
at the end of the one, five, or ten year periods
(or fractional portion of such period).
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The average annual total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended October 31 are found in Appendix J.
Total returns quoted in advertising reflect all aspects of a Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value per share over the period. Cumulative total return reflects the performance of a Fund over a stated period of time. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period.
Each Fund's total return is calculated in accordance with a standardized formula for computation of annualized total return.
A Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical compounded annual rate of return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Because average annual returns tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual returns into income results and capital gains or losses.
Alternative Total Return Quotations
Standard total return quotes may be accompanied by total return figures calculated by alternative methods. For example, average annual total return may be calculated without assuming payment of the full sales load according to the following formula:
n P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000;
U = average annual total return assuming payment of
only a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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Cumulative total return across a stated period may be calculated as follows:
P(1+V)=ERV
Where P = a hypothetical initial payment of $1,000;
V = cumulative total return assuming payment of all of,
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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The cumulative total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended October 31 are found in Appendix J.
Average Annual Total Return (After Taxes on Distributions) Quotation
A Fund's average annual total return (after taxes on distributions) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on distributions, but not on redemption proceeds. Average annual total returns (after taxes on distributions) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions) is:
n P(1+T) = ATV
D
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on distributions);
N = number of years; and
ATV = ending value of a hypothetical $1,000 payment
D made at the beginning of the one, five, or ten year
periods (or since inception, if applicable) at the
end of the one, five, or ten year periods (or since
inception, if applicable), after taxes on fund
distributions but not after taxes on redemption.
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Standardized average annual total return (after taxes on distributions) for Institutional Class shares does not reflect a deduction of any sales charges since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Institutional Class shares for the one, five and ten year periods (or since inception if less than ten years) ended October 31 are found in Appendix J.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund Shares) Quotation
A Fund's average annual total return (after taxes on distributions and sale of Fund shares) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on both distributions and proceeds. Average annual total returns (after taxes on distributions and redemption) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions and redemption) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions and redemption) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions and redemption) is:
n P(1+T) = ATV
DR
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on distributions
and redemption);
N = number of years; and
ATV = ending value of a hypothetical $1,000 payment
DR made at the beginning of the one, five, or ten year
periods (or since inception, if applicable) at the
end of the one, five, or ten year periods (or since
inception, if applicable), after taxes on fund
distributions and redemption.
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Standardized average annual total return (after taxes on distributions and redemption) for Institutional Class shares does not reflect a deduction of any sales charges since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes due on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The ending values for each period assume a complete liquidation of all shares. The ending values for each period are determined by subtracting capital gains taxes resulting from the sale of Fund shares and adding the tax benefit from capital losses resulting from the sale of Fund shares. The capital gain or loss upon sale of Fund shares is calculated by subtracting the tax basis from the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are calculated using the highest federal individual capital gains tax rate for gains of the appropriate character (e.g., ordinary income or long-term) in effect on the date of the sale of Fund shares and in accordance with federal tax law applicable on that date. The calculations assume that a shareholder may deduct all capital losses in full.
The basis of shares acquired through the $1,000 initial investment are tracked separately from subsequent purchases through reinvested distributions. The basis for a reinvested distribution is the distribution net of taxes paid on the distribution. Tax basis is adjusted for any distributions representing returns of capital and for any other tax basis adjustments that would apply to an individual taxpayer.
The amount and character (i.e., short-term or long-term) of capital gain or loss upon sale of Fund shares is determined separately for shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested distributions. The tax character is determined by the length of the measurement period in the case of the initial $1,000 investment and the length of the period between reinvestment and the end of the measurement period in the case of reinvested distributions.
The average annual total returns (after taxes on distributions and redemption) for each Fund, with respect to its Institutional Class shares for the one, five and ten year periods (or since inception if less than 10 years) ended October 31, are found in Appendix J.
Performance Information
All advertisements for the Funds will disclose the maximum sales charge (including deferred sales charges) imposed on purchases of a Fund's shares. If any advertised performance data for such classes does not reflect the maximum sales charge (if any), such advertisement will disclose that the sales charge has not been deducted in computing the performance data, and that, if reflected, the maximum sales charge would reduce the performance quoted. Further information regarding each
Fund's performance is contained in that Fund's annual report to shareholders, which is available upon request and without charge.
From time to time, AIM or its affiliates may waive all or a portion of their fees and/or assume certain expenses of any Fund. Fee waivers or reductions or commitments to reduce expenses will have the effect of increasing that Fund's yield and total return.
Certain Funds may participate in the IPO market in some market cycles. Because of these Funds' small asset bases, any investment the Funds may make in IPOs may significantly affect these Funds' total returns. As the Funds' assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the Funds' total returns.
The performance of each Fund will vary from time to time and past results are not necessarily indicative of future results.
Total return and yield figures for the Funds are neither fixed nor guaranteed. The Funds may provide performance information in reports, sales literature and advertisements. The Funds may also, from time to time, quote information about the Funds published or aired by publications or other media entities which contain articles or segments relating to investment results or other data about one or more of the Funds. The following is a list of such publications or media entities:
Advertising Age Forbes Nation's Business Barron's Fortune New York Times Best's Review Hartford Courant Pension World Broker World Inc. Pensions & Investments Business Week Institutional Investor Personal Investor Changing Times Insurance Forum Philadelphia Inquirer Christian Science Monitor Insurance Week USA Today Consumer Reports Investor's Business Daily U.S. News & World Report Economist Journal of the American Wall Street Journal FACS of the Week Society of CLU & ChFC Washington Post Financial Planning Kiplinger Letter CNN Financial Product News Money CNBC Financial Services Week Mutual Fund Forecaster PBS Financial World |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor Stanger Donoghue's Weisenberger Mutual Fund Values (Morningstar) Lipper, Inc. |
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Lipper Large Cap Core Fund Index Russell 1000 --Registered Trademark-- Growth Index Lipper Large Cap Growth Fund Index Russell 2500 --Registered Trademark-- Growth Index Lipper Large Cap Value Index Russell 3000 --Registered Trademark-- Index Lipper Mid Cap Core Fund Index Russell Mid Cap Index Lipper Mid Cap Growth Fund Index Russell Mid Cap(TM) Growth Index Lipper Multi Cap Growth Fund Index Standard & Poor's 500 Stock Index Russell 1000 --Registered Trademark-- Index Standard & Poor's MidCap 400 Index Russell 1000 --Registered Trademark-- Value Index Russell 2500 --Registered Trademark-- Index |
Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of general economic conditions and interest rates. Advertising for such Funds may also include references to the use of those Funds as part of an individual's overall retirement investment program. From time to time, sales literature and/or advertisements for any of the Funds may disclose: (i) the largest holdings in the Funds' portfolios; (ii) certain selling group members; (iii) certain institutional shareholders; (iv) measurements of risk, including standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector analyses of holdings in the Funds' portfolios.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
PENDING LITIGATION
A number of civil lawsuits, including purported class action and shareholder derivative suits, have been filed that involve one or more AIM or INVESCO Funds, their former and/or current investment adviser and/or certain other related parties and that are related to the claims filed by the SEC and/or the New York Attorney General against these parties. A list of such lawsuits that have been served as of February 23, 2004 is set forth in Appendix K.
APPENDIX A
RATINGS OF DEBT SECURITIES
The following is a description of the factors underlying the debt ratings of Moody's, S&P and Fitch:
MOODY'S LONG-TERM DEBT RATINGS
Moody's corporate ratings areas follows:
Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds and preferred stock which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. These are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk in Aa rated bonds appear somewhat larger than those securities rated Aaa.
A: Bonds and preferred stock which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds and preferred stock which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba: Bonds and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds and preferred stock which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds and preferred stock which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment grade , to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.
Note: In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal ratings are opinions of the investment quality of issuers and issues in the US municipal and tax-exempt markets. As such, these ratings incorporate Moody's assessment of the default probability and loss severity of these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors relating to municipal finance: economy, debt, finances, and administration/management strategies. Each of the factors is evaluated individually and for its effect on the other factors in the context of the municipality's ability to repay its debt.
Aaa: Issuers or issues rated Aaa demonstrate the strongest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness relative to other US municipal or tax-exempt issuers or issues.
A: Issuers or issues rated A present above-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Baa: Issuers or issues rated Baa represent average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to Caa. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category.
MOODY'S MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for short-term obligations that are considered investment grade. These ratings are designated as Moody's Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations will be a function of each issue's specific structural or credit features.
Gradations of investment quality are indicated by rating symbols, with each symbol representing a group in which the quality characteristics are broadly the same.
MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following considerations: likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; nature of and provisions of the obligation; and protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
A: Debt rated A has a strong capacity to meet its financial commitments although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
NR: Not Rated.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols for the put option (for example, AAA/A-1+). With short-term demand debt, the note rating symbols are used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days.
These categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
B: Issues rated 'B' are regarded as having only speculative capacity for timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note); and source of payment (the more dependant the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a securities issue to meet financial commitments, such as interest, preferred dividends, or repayment of principal, on a timely basis. These credit ratings apply to a variety of entities and issues, including but not limited to sovereigns, governments, structured financings, and corporations; debt, preferred/preference stock, bank loans, and counterparties; as well as the financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood
of getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Entities or issues carrying the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch credit and research are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments of any security.
The ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch Ratings believes to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of such information. Ratings may be changed or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the
program concerned; it should not be assumed that these ratings apply to every
issue made under the program. In particular, in the case of non-standard issues,
i.e., those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applicable
program rating.
Credit ratings do not directly address any risk other than credit risk. In particular, these ratings do not deal with the risk of loss due to changes in market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong capacity for timely payment of financial commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor has a very strong capacity for timely payment of financial commitments which is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of good credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances are more likely to impair this capacity.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is a reasonable possibility of a rating change and the likely direction of such change. These are designated as "Positive," indicating a potential upgrade, "Negative," for potential downgrade, or "Evolving," if ratings may be raised, lowered or maintained. RatingWatch is typically resolved over a relatively short period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk developing, particularly as the result of adverse economic changes over time. However, business and financial alternatives may be available to allow financial commitments to be met.
B: Bonds are considered highly speculative. Significant credit risk is present but a limited margin of safety remains. While bonds in this class are currently meeting financial commitments, the capacity for continued payment is contingent upon a sustained, favorable business and economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and are valued on the basis of their prospects for achieving partial or full recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings. A Short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated "F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as in the case of the higher ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment default.
APPENDIX B
TRUSTEES AND OFFICERS
As of January 1, 2004
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 104 portfolios in the AIM Funds and INVESCO Funds complex, except for Messrs. Baker, Bunch, Lewis and Soll who oversees 96 portfolios and Mr. Williamson who oversees 117 portfolios in the AIM and INVESCO funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
---------------------------------------------------------------------------------------------------------------------
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR
POSITION(S) HELD WITH THE OFFICER OTHER TRUSTEESHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
---------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group None
Trustee, Chairman and Inc. (financial services holding company);
President Director and Vice Chairman, AMVESCAP PLC and
Chairman of AMVESCAP PLC - AIM Division
(parent of AIM and a global investment
management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M Capital
Management, Inc. (registered investment
advisor), A I M Distributors, Inc. (registered
broker dealer), AIM Investment Services, Inc.
(registered transfer agent), and Fund
Management Company (registered broker dealer);
and Chief Executive Officer, AMVESCAP PLC -
Managed Products
---------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 2003 Director, President and Chief Executive Officer, None
1951 Trustee and Executive A I M Management Group Inc. (financial services
Vice President holding company); Director, Chairman and
President, A I M Advisors, Inc. (registered
investment advisor); Director, A I M Capital
Management, Inc. (registered investment
advisor) and A I M Distributors, Inc.
(registered broker dealer), Director and
Chairman, AIM Investment Services, Inc.
(registered transfer agent), and Fund
Management Company (registered broker
dealer); and Chief Executive Officer,
AMVESCAP PLC - AIM Division (parent of AIM
and a global investment management firm)
Formerly: Director, Chairman, President and
Chief Executive Officer, INVESCO Funds Group,
Inc.; and INVESCO Distributors, Inc.; Chief
Executive Officer, AMVESCAP PLC - Managed
Products; Chairman and Chief Executive
Officer
---------------------------------------------------------------------------------------------------------------------
|
(2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust.
---------------------------------------------------------------------------------------------------------------------
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR
POSITION(S) HELD WITH THE OFFICER OTHER TRUSTEESHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
---------------------------------------------------------------------------------------------------------------------
of NationsBanc Advisors, Inc.; and Chairman
of NationsBanc Investments, Inc.
---------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
---------------------------------------------------------------------------------------------------------------------
Bob R. Baker - 1936 2003 Retired None
Trustee
Formerly: President and Chief Executive
Officer, AMC Cancer Research Center; and
Chairman and Chief Executive Officer, First
Columbia Financial Corporation
---------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Badgley Funds, Inc.
Trustee (registered
Formerly: Partner, law firm of Baker & McKenzie investment company)
---------------------------------------------------------------------------------------------------------------------
James T. Bunch - 1942 2003 Co-President and Founder, Green, Manning & Bunch None
Trustee Ltd., (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder Insurance
Corporation
---------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited
Trustee (technology consulting company) (insurance company);
and Captaris, Inc.
(unified messaging
provider)
---------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private Cortland Trust, Inc.
Trustee business corporations, including the Boss Group, (Chairman)
Ltd. (private investment and management) and (registered
Magellan Insurance Company investment company);
Formerly: Director, President and Chief Annuity and Life Re
Executive Officer, Volvo (Holdings), Ltd.
Group North America, Inc.; Senior Vice President, (insurance company)
AB Volvo; and director of various affiliated
Volvo companies
---------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee Formerly: Chairman, Mercantile Mortgage Corp.;
President and Chief Operating Officer,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares Corp.
---------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Administaff; and
Trustee Group, Inc. (government affairs company) and Discovery Global
Texana Timber LP (sustainable forestry company) Education Fund
(non-profit)
---------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Cortland Trust, Inc.
Trustee Frankel LLP (registered
investment company)
---------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis - 1933 2003 Chairman, Lawsuit Resolution Services (San General Chemical
Trustee Diego, California) Group, Inc.,
Formerly: Associate Justice of the California
Court of Appeals
---------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the None
Trustee USA
---------------------------------------------------------------------------------------------------------------------
|
---------------------------------------------------------------------------------------------------------------------
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR
POSITION(S) HELD WITH THE OFFICER OTHER TRUSTEESHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
---------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper None
Trustee
---------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
---------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 1989 Executive Vice President, Development and None
Trustee Operations, Hines Interests Limited Partnership
(real estate development company)
---------------------------------------------------------------------------------------------------------------------
Larry Soll, Ph.D. - 1942 2003 Retired None
Trustee
---------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
---------------------------------------------------------------------------------------------------------------------
Kevin M. Carome - 1956 2003 Director, Senior Vice President, Secretary and N/A
Senior Vice President and Chief General Counsel, A I M Management Group Inc.
Legal Officer (financial services holding company) and A I M
Advisors, Inc.; and Vice President, A I M
Capital Management, Inc., A I M Distributors,
Inc. and AIM Investment Services, Inc.;
Director, Vice President and General Counsel,
Fund Management Company
Formerly: Senior Vice President and General
Counsel, Liberty Financial Companies, Inc.; and
Senior Vice President and General Counsel,
Liberty Funds Group, LLC
---------------------------------------------------------------------------------------------------------------------
Stuart W. Coco -- 1955 2002 Managing Director and Director of Money Market N/A
Vice President Research and Special Projects, A I M Capital
Management, Inc.; and Vice President, A I M
Advisors, Inc.
---------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I N/A
Vice President M Advisors, Inc. and A I M Capital Management,
Inc.; and Vice President, AIM Investment
Services, Inc.
---------------------------------------------------------------------------------------------------------------------
Sidney Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President and Treasurer Advisors, Inc.; Vice President, A I M
Distributors, Inc.; and Senior Vice President,
AIM Investment Services, Inc.
---------------------------------------------------------------------------------------------------------------------
Edgar M. Larsen -- 1940 1999 Vice President, A I M Advisors, Inc.; and N/A
Vice President President, Chief Executive Officer and Chief
Investment Officer, A I M Capital Management,
Inc.
---------------------------------------------------------------------------------------------------------------------
|
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2003
---------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY OF
NAME OF TRUSTEE PER FUND FUNDS --Registered Trademark--
---------------------------------------------------------------------------------------------------------------------
Robert H. Graham Aggressive Growth Over $100,000 Over $100,000
Basic Value Over $100,000
Blue Chip $10,001 - $50,000
Capital Development Over $100,000
Charter $10,001 - $50,000
Constellation Over $100,000
Emerging Growth $10,001 - $50,000
Diversified Dividend $10,001 - $50,000
Large Cap Basic Value Over $100,000
Large Cap Growth $10,001 - $50,000
Mid Cap Growth $10,001 - $50,000
Weingarten Over $100,000
---------------------------------------------------------------------------------------------------------------------
Mark H. Williamson -0- Over $100,000
---------------------------------------------------------------------------------------------------------------------
Bob R. Baker Blue Chip $1 - $10,000 Over $100,000
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
Frank S. Bayley Charter $1 - $10,000 $50,001 - $100,000
Mid Cap Growth $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
James T. Bunch Blue Chip $1 - $10,000 Over $100,000
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett Blue Chip $1 - $10,000 $10,001 - $50,000
Large Cap Growth $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
Albert R. Dowden Blue Chip $10,001 - $50,000 Over $100,000
Emerging Growth $10,001 - $50,000
---------------------------------------------------------------------------------------------------------------------
|
---------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY OF
NAME OF TRUSTEE PER FUND FUNDS --Registered Trademark--
---------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. Capital Development Over $100,000 Over $100,000(3)
---------------------------------------------------------------------------------------------------------------------
Jack M. Fields Blue Chip Over $100,000 Over $100,000(3)
Charter Over $100,000
Constellation Over $100,000
Weingarten Over $100,000
---------------------------------------------------------------------------------------------------------------------
Carl Frischling Aggressive Growth $50,001 - $100,000 Over $100,000(3)
Blue Chip Over $100,000
Capital Development Over $100,000
Charter Over $100,000
Constellation Over $100,000
Weingarten $50,001 - $100,000
---------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis Blue Chip $1 - $10,000 $50,001 - $100,000
Capital Development $10,001 - $50,000
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -0- $1 - $10,000(3)
---------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock Charter $10,001 - $50,000 $50,001 - $100,000
Large Cap Basic Value $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -0- $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
|
---------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY OF
NAME OF TRUSTEE PER FUND FUNDS --Registered Trademark--
---------------------------------------------------------------------------------------------------------------------
Louis S. Sklar Aggressive Growth Over $100,000 Over $100,000(3)
Charter Over $100,000
Constellation Over $100,000
Weingarten Over $100,000
---------------------------------------------------------------------------------------------------------------------
Larry Soll, Ph.D. Blue Chip $50,001 - $100,000 Over $100,000
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
---------------------------------------------------------------------------------------------------------------------
|
APPENDIX C
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2003:
RETIREMENT
AGGREGATE BENEFITS ESTIMATED ANNUAL TOTAL
COMPENSATION FROM ACCRUED BENEFITS UPON COMPENSATION
THE BY ALL RETIREMENT FROM FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS (2) ALL AIM FUNDS (3) FUNDS(4)
--------------------------------------------------------------------------------------------------------------
Bob R. Baker(5) 0 $ 32,635 $ 114,131 $ 154,554
--------------------------------------------------------------------------------------------------------------
Frank S. Bayley $ 26,334 131,228 90,000 159,000
--------------------------------------------------------------------------------------------------------------
James T. Bunch(5) 0 20,436 90,000 138,679
--------------------------------------------------------------------------------------------------------------
Bruce L. Crockett 26,501 46,000 90,000 160,000
--------------------------------------------------------------------------------------------------------------
Albert R. Dowden 26,334 57,716 90,000 159,000
--------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. 26,501 94,860 90,000 160,000
--------------------------------------------------------------------------------------------------------------
Jack M. Fields 26,325 28,036 90,000 159,000
--------------------------------------------------------------------------------------------------------------
Carl Frischling(6) 26,501 40,447 90,000 160,000
--------------------------------------------------------------------------------------------------------------
Gerald J. Lewis(5) 0 20,436 90,000 142,054
--------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis 26,501 33,142 90,000 160,000
--------------------------------------------------------------------------------------------------------------
Lewis F. Pennock 26,501 49,610 90,000 160,000
--------------------------------------------------------------------------------------------------------------
Ruth H. Quigley 26,501 126,050 90,000 160,000
--------------------------------------------------------------------------------------------------------------
Louis S. Sklar 26,501 72,786 90,000 160,000
--------------------------------------------------------------------------------------------------------------
Larry Soll(5) 0 48,830 108,090 140,429
==============================================================================================================
|
(1) Amounts shown are based on the fiscal year ended October 31, 2003. The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended October 31, 2003, including earnings, was $91,754.
(2) During the fiscal year ended October 31, 2003, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $234,665.
(3) These amounts represent the estimated annual benefits payable by the AIM Funds and INVESCO Funds upon the trustee's retirement. These estimated benefits assume retirement at age 65 for the AIM Funds and at age 72 for the INVESCO Funds. Amounts shown assume each trustee serves until his or her normal retirement date and has ten years of service.
(4) All trustees currently serve as trustees of 19 registered investment companies advised by AIM.
(5) Messrs. Baker, Bunch, Lewis and Dr. Soll were elected as trustees of the Trust on October 21, 2003 and therefore received no compensation from the Trust during the fiscal year ended October 31, 2003.
(6) During the fiscal year ended October 31, 2003, the Trust paid $65,685 in legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such firm as counsel to the independent trustees of the Trust. Mr. Frischling is a partner of such firm.
APPENDIX D
PROXY POLICIES AND PROCEDURES
Reviewed by the AIM Funds Board of Directors/Trustees June 10, 2003 Adopted by the Board of Directors of each of A I M Advisors, Inc., A I M Capital Management, Inc., AIM Private Asset Management, Inc. and AIM Alternative Asset Management Company, Inc. June 26, 2003
(REVISED AS OF JANUARY 8, 2004)
A. PROXY POLICIES
Each of A I M Advisors, Inc., A I M Capital Management, Inc., AIM Private Asset Management, Inc. and AIM Alternative Asset Management Company, Inc. (each an "AIM Advisor" and collectively "AIM") has the fiduciary obligation to, at all times, make the economic best interest of advisory clients the sole consideration when voting proxies of companies held in client accounts. As a general rule, each AIM Advisor shall vote against any actions that would reduce the rights or options of shareholders, reduce shareholder influence over the board of directors and management, reduce the alignment of interests between management and shareholders, or reduce the value of shareholders' investments. At the same time, AIM believes in supporting the management of companies in which it invests, and will accord proper weight to the positions of a company's board of directors, and the AIM portfolio managers who chose to invest in the companies. Therefore, on most issues, our votes have been cast in accordance with the recommendations of the company's board of directors, and we do not currently expect that trend to change. Although AIM's proxy voting policies are stated below, AIM's proxy committee considers all relevant facts and circumstances, and retains the right to vote proxies as deemed appropriate.
I. BOARDS OF DIRECTORS
A board that has at least a majority of independent directors is integral to good corporate governance. Key board committees, including audit, compensation and nominating committees, should be completely independent.
There are some actions by directors that should result in votes being withheld. These instances include directors who:
- Are not independent directors and (a) sit on the board's audit, compensation or nominating committee, or (b) sit on a board where the majority of the board is not independent;
- Attend less than 75 percent of the board and committee meetings without a valid excuse;
- Implement or renew a dead-hand or modified dead-hand poison pill;
- Sit on the boards of an excessive number of companies;
- Enacted egregious corporate governance or other policies or failed to replace management as appropriate;
- Have failed to act on takeover offers where the majority of the shareholders have tendered their shares; or
- Ignore a shareholder proposal that is approved by a majority of the shares outstanding.
Votes in a contested election of directors must be evaluated on a case-by-case basis, considering the following factors:
- Long-term financial performance of the target company relative to its industry;
- Management's track record;
- Portfolio manager's assessment;
- Qualifications of director nominees (both slates);
- Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and
- Background to the proxy contest.
II. INDEPENDENT AUDITORS
A company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of impaired independence. We will support the reappointment of the company's auditors unless:
- It is not clear that the auditors will be able to fulfill their function;
- There is reason to believe the independent auditors have rendered an opinion that is neither accurate nor indicative of the company's financial position; or
- The auditors have a significant professional or personal relationship with the issuer that compromises the auditors' independence.
III. COMPENSATION PROGRAMS
Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders' ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider all incentives, awards and compensation, and compare them to a company-specific adjusted allowable dilution cap and a weighted average estimate of shareholder wealth transfer and voting power dilution.
- We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.
- We will support the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value.
- We will vote against plans that have any of the following structural features: ability to re-price underwater options without shareholder approval, ability to issue options with an exercise price below the stock's current market price, ability to issue reload options, or automatic share replenishment ("evergreen") feature.
- We will vote for proposals to reprice options if there is a value-for-value (rather than a share-for-share) exchange.
- We will generally support the board's discretion to determine and grant appropriate cash compensation and severance packages.
IV. CORPORATE MATTERS
We will review management proposals relating to changes to capital structure, reincorporation, restructuring and mergers and acquisitions on a case by case basis, considering the impact of the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company's industry and performance in terms of shareholder returns.
- We will vote for merger and acquisition proposals that the proxy committee and relevant portfolio managers believe, based on their review of the materials, will
- result in financial and operating benefits, have a fair offer price, have favorable prospects for the combined companies, and will not have a negative impact on corporate governance or shareholder rights.
- We will vote against proposals to increase the number of authorized shares of any class of stock that has superior voting rights to another class of stock.
- We will vote for proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company's industry and performance in terms of shareholder returns.
- We will vote for proposals to institute open-market share repurchase plans in which all shareholders participate on an equal basis.
V. SHAREHOLDER PROPOSALS
Shareholder proposals can be extremely complex, and the impact on share value can rarely be anticipated with any high degree of confidence. The proxy committee reviews shareholder proposals on a case-by-case basis, giving careful consideration to such factors as: the proposal's impact on the company's short-term and long-term share value, its effect on the company's reputation, the economic effect of the proposal, industry and regional norms applicable to the company, the company's overall corporate governance provisions, and the reasonableness of the request.
- We will generally abstain from shareholder social and environmental proposals.
- We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices.
- We will generally vote for shareholder proposals that are designed to protect shareholder rights if the company's corporate governance standards indicate that such additional protections are warranted.
- We will generally vote for proposals to lower barriers to shareholder action.
- We will generally vote for proposals to subject shareholder rights plans to a shareholder vote. In evaluating these plans, we give favorable consideration to the presence of "TIDE" provisions (short-term sunset provisions, qualified bid/permitted offer provisions, and/or mandatory review by a committee of independent directors at least every three years).
VI. OTHER
- We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.
- We will vote against any proposals to authorize the proxy to conduct any other business that is not described in the proxy statement.
- We will vote any matters not specifically covered by these proxy policies and procedures in the economic best interest of advisory clients.
AIM's proxy policies, and the procedures noted below, may be amended from time to time.
B. PROXY COMMITTEE PROCEDURES
The proxy committee currently consists of representatives from the Legal and Compliance Department, the Investments Department and the Finance Department.
The committee members review detailed reports analyzing the proxy issues and have access to proxy statements and annual reports. The committee then discusses the issues and determines the vote. The committee shall give appropriate and significant weight to portfolio managers' views regarding a proposal's impact on shareholders. A proxy committee meeting requires a quorum of three committee members, voting in person or by proxy.
AIM's proxy committee shall consider its fiduciary responsibility to all clients when addressing proxy issues and vote accordingly. The proxy committee may enlist the services of reputable outside professionals and/or proxy evaluation services, such as Institutional Shareholder Services or any of its subsidiaries ("ISS"), to assist with the analysis of voting issues and/or to carry out the actual voting process. To the extent the services of ISS or another provider are used, the proxy committee shall periodically review the policies of that provider.
In addition to the foregoing, the following shall be strictly adhered to unless contrary action receives the prior approval of the Funds' Board of Directors/Trustees:
1. Other than by voting proxies and participating in Creditors' committees, AIM shall not engage in conduct that involves an attempt to change or influence the control of a company.
2. AIM will not publicly announce its voting intentions and the reasons therefore.
3. AIM shall not participate in a proxy solicitation or otherwise seek proxy-voting authority from any other public company shareholder.
4. All communications regarding proxy issues between the proxy committee and companies or their agents, or with fellow shareholders shall be for the sole purpose of expressing and discussing AIM's concerns for its advisory clients' interests and not for an attempt to influence or control management.
C. BUSINESS/DISASTER RECOVERY
If the proxy committee is unable to meet due to a temporary business interruption, such as a power outage, a sub-committee of the proxy committee may vote proxies in accordance with the policies stated herein. If the sub-committee of the proxy committee is not able to vote proxies, the sub-committee shall authorize ISS shallto vote proxies by default in accordance with ISS' proxy policies and procedures, which may vary slightly from AIM's.
D. RESTRICTIONS AFFECTING VOTING
If a country's laws allow a company in that country to block the sale of the company's shares by a shareholder in advance of a shareholder meeting, AIM will not vote in shareholder meetings held in that country, unless the company represents that it will not block the sale of its shares in connection with the meeting. Administrative or other procedures, such as securities lending, may also cause AIM to refrain from voting. Although AIM considers proxy voting to be an important shareholder right, the proxy committee will not impede a portfolio manager's ability to trade in a stock in order to vote at a shareholder meeting.
E. CONFLICTS OF INTEREST
The proxy committee reviews each proxy to assess the extent to which there may be a material conflict between AIM's interests and those of advisory clients. A potential conflict of interest situation may include where AIM or an affiliate manages assets for, administers an employee benefit plan for, provides other financial products or services to, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote proxies in favor of management of the company may harm AIM's relationship with the company. In order to avoid even the appearance of impropriety, the proxy committee will not take AIM's relationship with the company into account, and will vote the company's proxies in the best interest of the advisory clients, in accordance with these proxy policies and procedures.
To the extent that a committee member has any conflict of interest with respect to a company or an issue presented, that committee member should inform the proxy committee of such conflict and abstain from voting on that company or issue.
APPENDIX E
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the record and beneficial holders of 5% or more of the outstanding shares of each class of the Trust's equity securities and the percentage of the outstanding shares held by such holders are set forth below. Unless otherwise indicated below, the Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially.
A shareholder who owns beneficially 25% or more of the outstanding securities of a Fund is presumed to "control" that Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
All information listed below is as of February 3, 2004.
AIM AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R SHARES INSTITUTIONAL
SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
PRINCIPAL HOLDER OWNED OF OWNED OF OWNED OF PERCENTAGE OWNED OWNED OF
RECORD RECORD RECORD OF RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta 7th Fl 5.27% - 5.06% - -
333 West 34th St.
New York, NY 10001-2402
--------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers 6.92% - 11.12% - -
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
--------------------------------------------------------------------------------------------------------------------
The Manufacturers Life
Insurance Company
250 Bloor St East, 7th Floor 13.52% - - - -
Toronto, Ontario, Canada
M4WIE5
--------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department - - - - 5.01%
PO Box 901075
Fort Worth, TX 76101-2075
--------------------------------------------------------------------------------------------------------------------
Girard Machine Company Inc.
401(K)
FBO Donald Malito Trustee - - - 7.19% -
700 Dot Street
Girard, Ohio 44420-1701
--------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C INSTITUTIONAL
SHARES SHARES SHARES CLASS R SHARES CLASS SHARES
--------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF PERCENTAGE OWNED OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD OF RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Olson International Ltd - - - 9.45% -
401(K) plan
PO Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Company TTE
FBO Otis Koglin Wilson - - - 12.97% -
Architects Inc. 401 (K) Plan
P. O. Box 105779
Atlanta, GA 30348-5779
--------------------------------------------------------------------------------------------------------------------
Reliance Trust
FBO Northern Printing Network
401(K) - - - 7.89% -
PO Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
Patterson & Co FBO
Freudenberg PN
1525 West Wt Harris Blvd NC - - - - 80.35%
1151
Charlotte, NC 28288-0001
--------------------------------------------------------------------------------------------------------------------
- - - - 12.88%
Patterson & Co FBO
Freudenberg SPUN
1525 West Wt Harris Blvd NC
1151
Charlotte, NC 28288-0001
--------------------------------------------------------------------------------------------------------------------
|
AIM BASIC VALUE II FUND
--------------------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plaza 100%** 100%** 100%**
Suite 100
Houston, TX 77046
--------------------------------------------------------------------------------------------------------------------
|
* Owned of record and beneficially.
** Presumed to be a control person because of beneficial ownership of 25% or more of the Fund.
AIM BLUE CHIP FUND
-------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
---------------------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF OWNED OF OWNED OF OWNED OF PERCENTAGE OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD OWNED OF RECORD RECORD RECORD
-------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration 7.60% 7.54% 13.73% - - -
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL
32246-6484
-------------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp
FBO
The One Investment
Solution
Attn: Wrap Processing - - 7.04% - - -
OH1-1244
1111 Polaris Pkwy,
Suite J-2
Columbus, OH 43240-2050
-------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Acct.
Attn: Cindy Tempesta 7th - 6.42% 6.98% - - -
Floor
333 West 34th Street
New York, NY 10001-2402
-------------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc.
Special Custody FBO
Customers (SIM)
Attn: Mutual Funds - - - - - 9.54%
101 Montgomery St.
San Francisco, CA
94104-4122
-------------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department - - - - 99.65% -
PO Box 901075
Fort Worth, TX 76101-2075
-------------------------------------------------------------------------------------------------------------------------
|
AIM CAPITAL DEVELOPMENT FUND
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
-------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration 6.02% 9.57% 12.71% - -
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
-------------------------------------------------------------------------------------------------------------
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta 7th Fl - 6.86% - - -
333 West 34th St.
New York, NY 10001-2402
-------------------------------------------------------------------------------------------------------------
Coastgear & Company
State Street Bank & Trust
Attn: Kevin Smith - - 9.39% - -
105 Rosemont Avenue
Westwood, MA 02090
-------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plaza - - - - 95.50%
Suite 100
Houston, TX 77046
-------------------------------------------------------------------------------------------------------------
AMVESCAP Natl TR CO FBO
Equator Technologies, Inc. 401
(K) Retirement Plan - - - 42.38% -
P. O. Box 105779
Atlanta, GA 30348-5779
-------------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO
Floorgraphics, Inc. 401(K) Plan - - - 13.30% -
700 17th Street, Suite 300
Denver, Co. 80202-3531
-------------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO
Big Boy Restaurant
International - - - 12.69% -
700 17th Street, Suite 300
Denver, Co. 80202-3531
-------------------------------------------------------------------------------------------------------------
|
* Owned of record and beneficially.
AIM CHARTER FUND
------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
-------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 8.07% 5.86% 13.61% - -
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
------------------------------------------------------------------------------------------------------------
City National Bank
Attn: Trust Operations/Mutual
Funds - - - - 6.34%
P.O. Box 60520
Los Angeles, CA 90060-0520
------------------------------------------------------------------------------------------------------------
Town of Watertown, Trustee
FBO: Town of Watertown
457 Deferred Compensation Plan - - - - 5.29%
C/O Great West, Recordkeeper
8515 E. Orchard Rd 2T2
Englewood, CO 80111-0000
------------------------------------------------------------------------------------------------------------
AMVESCAP Natl TR CO FBO Equator
Technologies, Inc. 401 (K)
Retirement Plan - - - 19.44% -
P. O. Box 105779
Atlanta, GA 30348-5779
------------------------------------------------------------------------------------------------------------
INVESCO Trust Company TTEE
FBO Big Horn Basin
Orthopedic Clinic PC - - - 15.05% -
401(K) Profit Sharing Plan
PO Box 105779
Atlanta, GA 30348-5779
------------------------------------------------------------------------------------------------------------
Reliance Trust Company Morley
Incentives 401(K) Profit Sharing
Plan & Trust - - - 26.76% -
P. O. Box 48529
Atlanta, GA 30362-1529
------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department - - - - 52.27%
PO Box 901075
Fort Worth, TX 76101-0000
------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
-------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------
Citigroup Global Markets House
Acct.
Attn: Cindy Tempesta 7th Floor 5.56% 6.05% 6.98% - -
333 West 34th Street
New York, NY 10001-2402
------------------------------------------------------------------------------------------------------------
AMVESCAP Natl TR CO as Agent for
Valic FBO Pieper Bancorp Inc. - - - 5.18% -
Profit Sharing Plan
P. O. Box 105779
Atlanta, GA 30348-5779
------------------------------------------------------------------------------------------------------------
|
AIM CONSTELLATION FUND
------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
-------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration 11.49% - 16.35% - -
4800 Deer Lake Dr East, 2nd
Floor
Jacksonville, FL 32246
------------------------------------------------------------------------------------------------------------
Ohio Public
Employees Deferred
Compensation - - - - 64.05%
250 Civic Center Dr., Suite
350
Columbus, OH 43215-5450
------------------------------------------------------------------------------------------------------------
Wells Fargo Bank West NA Cust.
City of Houston
457 Deferred Compensation Plan - - - - 11.04%
C/O Great West, Recordkeeper
8515 E. Orchard Rd 2T2
Englewood, CO 80111-0000
------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
-------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------
Nationwide Trust Company FBO
Participating Retirement Plans
C/O IPO Portfolio Accounting - - - - 10.17%
P.O. Box 182029
Columbus, OH 43218
---------------------------------------------------------------------------------------------------------
State of Vermont Deferred Comp
C/O Copeland Companies
Attn: Planned Valuation - - - - 7.87%
Services
2 Tower Center
East Brunswick, NJ 08816-0000
---------------------------------------------------------------------------------------------------------
Reliance Trust Company Cust FBO
William J. Kamm and Sons Inc.
401K Plan - - - 11.09% -
P. O. Box 48529
Atlanta, GA 30362-1529
---------------------------------------------------------------------------------------------------------
AMVESCAP National Trust Company
TTE
FBO Guys Inc. 401(k) Profit
Sharing Plan - - - 7.29% -
P. O. Box 105779
Atlanta, GA 30348-5779
---------------------------------------------------------------------------------------------------------
AMVESCAP Natl TR CO TTEE
FBO Speidel Inc. 401 (K) Plan
P. O. Box 105779 - - - 10.76% -
Atlanta, GA 30348-5779
---------------------------------------------------------------------------------------------------------
AMVESCAP Natl TR CO Cust FBO
Evans Industry Inc. Employee
Retirement Plan - - - 5.83% -
P. O. Box 105779
Atlanta, GA 30348-5779
---------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Account
Attn: Cindy Tempesta 7th Floor 5.86% 5.52% 7.27% - -
333 West 34th Street
New York, NY 10001-2403
---------------------------------------------------------------------------------------------------------
ING National Trust
151 Farming Ave - - - 5.37% -
Hartford, CT 06156-0001
---------------------------------------------------------------------------------------------------------
|
AIM CORE STRATEGIES FUND
---------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
---------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel 100%** 100%** 100%**
11 Greenway Plaza, Suite 100
Houston, TX 77046
---------------------------------------------------------------------------------------------------------
|
* Owned of record and beneficially.
** Presumed to be a control person because of beneficial ownership of 25% or more of the Fund.
AIM DENT DEMOGRAPHIC TRENDS FUND
-------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration - 10.20% 16.08%
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246
-------------------------------------------------------------------------------------------------------
Citigroup Global House Acct
Attn: Cindy Tempesta 7th Floor
333 West 34th Street 5.43% 9.74% 10.85%
New York, NY 10001-2402
-------------------------------------------------------------------------------------------------------
|
AIM DIVERSIFIED DIVIDEND FUND
-------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Solo Benefit of Customers
Attn: Fund Administration 6.22% 12.78% -
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
-------------------------------------------------------------------------------------------------------
|
AIM EMERGING GROWTH FUND
-------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 7.62% 6.14% 13.26%
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246
-------------------------------------------------------------------------------------------------------
|
AIM LARGE CAP BASIC VALUE FUND
----------------------------------------------------------------------------------------------------------------------------------
INVESTOR INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
--------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 23.18% 13.24% 21.67% - - N/A
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
----------------------------------------------------------------------------------------------------------------------------------
AMVESCAP Natl TR CO FBO Spring
Arbor Lumber
Employees Retirement Savings Plan - - - 5.78% - N/A
P. O. Box 105779
Atlanta, GA 30348-5779
----------------------------------------------------------------------------------------------------------------------------------
Reliance Trust Company Custodian
FBO Rosin Optical Co. Inc.
Profit Sharing Plan - - - 21.30% - N/A
P. O. Box 48529
Atlanta, GA 30362-1529
----------------------------------------------------------------------------------------------------------------------------------
MCB Trust Services Cust FBO
Joe Verde Sales and Management
Training Inc.
Profit Sharing Plan - - - 5.49% - N/A
700 17th St. Ste 300
Denver, CO 80202-3507
----------------------------------------------------------------------------------------------------------------------------------
Federated Lighting Inc. 401 K
Profit Sharing Plan - - - 20.10% - N/A
1600 Trade Zone #406
Upper Marlboro, MD 20772
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
INVESTOR INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
--------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------------------------
INVESCO Trust Company TTEE
Magellan Health Services
Retirement Savings Plan & Trust - - - - 14.78% N/A
401(K)
P. O. Box 105779
Atlanta, GA 30348-5779
----------------------------------------------------------------------------------------------------------------------------------
AMVESCAP NATL TC CUST
AP Technoglass Co
Belltech Retirement Plan - - - - 8.73% N/A
1465 W. Sandusky Ave.
Bellefontaine, OH 43311-1082
----------------------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co Inc.
Special Custody FBO Customers
(SIM) - - - - 8.37% N/A
Attn Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
----------------------------------------------------------------------------------------------------------------------------------
INVESCO Trust Company TTEE
Hickory Springs MFG Co.
Savings & Trust - - - - 5.11% N/A
P. O. Box 218
Hickory, NC 28603-0128
----------------------------------------------------------------------------------------------------------------------------------
|
AIM LARGE CAP GROWTH FUND
----------------------------------------------------------------------------------------------------------------------------------
INVESTOR INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
--------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 28.19% 10.42% 10.39% - - N/A
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
|
---------------------------------------------------------------------------------------------------------------------------------
INVESTOR INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
-------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
---------------------------------------------------------------------------------------------------------------------------------
INVESCOTrust Company TTEE
FBO Big Horn Basin Orthopedic
Clinic PC - - - 29.69% - N/A
401k Profit Sharing Plan
PO Box 105779
Atlanta, GA 30348
---------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets House
Acct.
Attn: Cindy Tempesta, 7th Floor - 6.19% 16.56% - - N/A
333 West 34th Street
New York, NY 10001-2483
---------------------------------------------------------------------------------------------------------------------------------
Reliance Trust Company Custodian
FBO Continental Products Inc.
401K Plan - - - 10.90% - N/A
P. O. Box 48529
Atlanta, GA 30362-1529
---------------------------------------------------------------------------------------------------------------------------------
Reliance Trust Company Custodian
FBO Morley Incentives 401(K) Plan
P. O. Box 48529 - - - 29.18% - N/A
Atlanta, GA 30362-1529
---------------------------------------------------------------------------------------------------------------------------------
|
AIM MID CAP GROWTH FUND
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES
--------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
---------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith 13.05% 9.09% 19.21% - N/A
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
---------------------------------------------------------------------------------------------------------------------
Charles T. Bauer*
11 Greenway Plaza 5.91% - - - N/A
Suite 100
Houston, TX 77046
---------------------------------------------------------------------------------------------------------------------
|
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES
--------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
---------------------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO
Pacific Business Group on Heal
700 17th Street, Suite 300 - - - 9.68% N/A
Denver, CO 80202-3507
---------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust co. FBO
West Boylston Insurance Agency Inc.
401 (K) Plan - - - 31.51% N/A
P. O. Box 105779
Atlanta, GA 30348-5779
--------------------------------------------------------------------------------------------------------------------
Morales Enterprises 401 (K) Plan
Connie S. Morales - - - 7.33% N/A
3103 Madison St.
Belevue, NE 68005-5541
-----------------------------------------------------------------------------------------------------------------------
MCB Trust Services Cust. FBO
Newington Services, Inc.
700 17th Street - - - 8.89% N/A
Suite 300
Denver, CO 80202-3531
-----------------------------------------------------------------------------------------------------------------------
Southeast TX Internal Medicine PA
Anthony O Gambrah - - - 5.90% N/A
7940 Doral Dr.
Beaumont, T 77707-5445
-----------------------------------------------------------------------------------------------------------------------
|
* Owned of record and beneficially
AIM U.S. GROWTH FUND
------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-----------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plaza 100%** 100%** 100%**
Suite 100
Houston, TX 77046
|
* Owned of record and beneficially.
** Presumed to be a control person because of beneficial ownership of 25% or more of the Fund.
AIM WEINGARTEN FUND
---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
-------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
---------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration 11.54% 5.52% 16.77% 30.02% -
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
---------------------------------------------------------------------------------------------------------------------
Macquarium Inc. 401 (K)
Louis K. or Mark F. Adler TTEES
Omnibus Account - - - 10.07% -
910 Travis St. Suite 1950
Houston, TX 77002-5806
---------------------------------------------------------------------------------------------------------------------
City of Cambridge, Trustee FBO
City of Cambridge 457 DCP
c/o Great West Recordkeeper - - - - 5.68%
8515 E. Orchard Rd. 2T2
Englewood, CO 80111-5002
---------------------------------------------------------------------------------------------------------------------
William Wilson Assoc Architects
401 (K)
James Leslie TTEE - - - 5.56% -
Omnibus Account
374 Congress St., Suite 400
Boston, MA 02210-1807
---------------------------------------------------------------------------------------------------------------------
Citigroup Global House Acct
Attn: Cindy Tempesta, 7th Floor 7.66% 6.37% 6.03% - -
333 West 34th Street
New York, NY 10001-2483
---------------------------------------------------------------------------------------------------------------------
AIM Foundation
Attn: Patricia Lewis - - - - 24.14%
11 Greenway Plaza, Suite 2600
Houston, TX 77046
---------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department - - - - 6.48%
PO Box 901075
Fort Worth, TX 76101-0000
---------------------------------------------------------------------------------------------------------------------
|
---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
-------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
---------------------------------------------------------------------------------------------------------------------
David Leary, Trustee
FBO: Town of Weymouth
457 Deferred Compensation Plan - - - - 8.78%
C/O Great West, Recordkeeper
8515 E. Orchard Rd 2T2
Englewood, CO 80111-0000
---------------------------------------------------------------------------------------------------------------------
Town of Watertown, Trustee
FBO: Town of Watertown
457 Deferred Compensation Plan - - - - 8.27%
C/O Great West, Recordkeeper
8515 E. Orchard Rd 2T2
Englewood, CO 80111-0000
---------------------------------------------------------------------------------------------------------------------
City of Springfield, Trustee,
FBO City of Springfield 457 DCP
C/O Great West, Recordkeeper - - - - 6.26%
8515 E. Orchard Rd. 2T2
Engelwood, CO 80111-5037
---------------------------------------------------------------------------------------------------------------------
|
MANAGEMENT OWNERSHIP
As of February 3, 2004, the trustees and officers as a group owned less than 1% of the outstanding shares of each class of each Fund.
APPENDIX F
MANAGEMENT FEES
For the last three fiscal years ended October 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
FUND NAME 2003 2002
---------------------------- ---------------------------------------- -------------------------------------------
NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT NET MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID FEE PAID FEE WAIVERS FEE PAID
------------ ------------ ------------ ------------ ------------ --------------
AIM Aggressive Growth Fund $ 13,458,191 $ 16,521 $ 13,441,670 $ 17,081,494 $ 16,400 $ 17,065,094
AIM Blue Chip Fund $ 17,924,075 $ 21,702 $ 17,902,373 $ 24,803,281 $ 26,519 $ 24,776,762
AIM Capital Development Fund $ 6,014,863 $ 11,378 $ 6,003,485 $ 7,368,692 $ 11,465 $ 7,357,227
AIM Charter Fund $ 20,917,533 $ 71,387 $ 20,846,146 $ 29,583,893 $ 58,255 $ 29,525,638
AIM Constellation Fund $ 46,349,081 $ 638,100 $ 45,710,981 $ 63,117,935 $ 1,334,866 $ 61,783,069
AIM Large Cap Basic Value Fund 1,211,828 1,844 1,209,984 1,168,281 793 1,167,488
AIM Large Cap Growth Fund 1,987,347 1,994 1,985,353 2,371,037 3,052 2,367,985
AIM Mid Cap Growth Fund 1,343,201 2,625 1,340,576 1,620,211 2,679 1,617,532
AIM U.S. Growth Fund(1) 7,519 7,519 -0- 1,237 1,237 -0-
AIM Weingarten Fund $ 17,030,956 $ 8,168 $ 17,022,788 $ 26,086,537 $ 28,985 $ 26,057,552
FUND NAME 2001
---------------------------- -----------------------------------------
MANAGEMENT MANAGEMENT MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAYABLE
------------ ------------ ------------
AIM Aggressive Growth Fund $ 23,755,259 $ 7,508 $ 23,747,751
AIM Blue Chip Fund $ 35,318,225 $ 153,216 $ 35,165,009
AIM Capital Development Fund $ 8,548,376 $ 3,281 $ 8,545,095
AIM Charter Fund $ 43,928,613 $ 504,457 $ 43,424,156
AIM Constellation Fund $ 93,618,688 $ 3,749,927 $ 89,868,761
AIM Large Cap Basic Value Fund 537,749 85,532 452,217
AIM Large Cap Growth Fund 3,378,201 1,590 3,376,611
AIM Mid Cap Growth Fund 1,860,437 875 1,859,562
AIM U.S. Growth Fund(1) N/A N/A N/A
AIM Weingarten Fund $ 46,064,764 $ 584,500 $ 45,480,264
|
APPENDIX G
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended October 31:
FUND NAME 2003 2002 2001
---------------------------- ---------- ---------- ----------
AIM Aggressive Growth Fund $ 453,825 $ 383,159 $ 276,738
AIM Blue Chip Fund $ 540,113 $ 441,011 $ 331,400
AIM Capital Development Fund $ 240,864 $ 205,580 $ 160,775
AIM Charter Fund $ 574,103 $ 468,551 $ 383,570
AIM Constellation Fund $ 696,174 $ 629,514 $ 622,082
AIM Large Cap Basic Value Fund $ 50,000 $ 50,000 $ 50,000
AIM Large Cap Growth Fund $ 91,795 $ 87,337 $ 110,085
AIM Mid Cap Growth Fund $ 50,000 $ 50,000 $ 50,000
AIM Weingarten Fund $ 519,857 $ 450,564 $ 392,623
|
APPENDIX H
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years ended October 31 were as follows:
FUND 2003 2002 2001
---- ----------- ----------- ----------
AIM Aggressive Growth Fund(2) $ 5,139,873 $ 5,920,899 6,473,868
AIM Blue Chip Fund 2,832,412 4,014,589 3,838,893
AIM Capital Development Fund 3,101,168 4,525,600 4,153,032
AIM Charter Fund 3,525,696 12,272,154 12,104,855
AIM Constellation Fund(3) 13,209,426 16,936,943 23,003,818
AIM Large Cap Basic Value Fund 280,781 300,919 235,562
AIM Large Cap Growth Fund 1,051,689 864,959 891,255
AIM Mid Cap Growth Fund 1,267,594 1,118,766 801,920
AIM Weingarten Fund(4) 12,206,561 23,824,701 30,640,967
|
(1) Disclosure regarding brokerage commissions is limited to commissions paid on agency trades and designated as such on the trade confirm.
(2) The variation in the brokerage commissions paid by AIM Aggressive Growth Fund for the fiscal year ended October 31, 2002, as compared to the fiscal year ended October 31, 2000, was due to a significant fluctuation in asset levels and cash outflows.
(3) The variation in brokerage commissions paid by AIM Constellation Fund for the fiscal year ended October 31, 2002, as compared to the two prior fiscal years was due to a decrease in asset levels and portfolio transactions.
(4) The variation in the brokerage commissions paid by AIM Weingarten Fund for the fiscal year ended October 31, 2002, as compared to the prior fiscal year, was due to a decrease in assets and portfolio turnover.
APPENDIX I
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended October 31, 2003, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
Related
Fund Transactions Brokerage Commissions
---- ------------ ---------------------
AIM Aggressive Growth Fund $ 549,935,694 $ 871,895
AIM Blue Chip Fund 351,493,218 513,144
AIM Capital Development Fund 236,130,889 462,292
AIM Charter Fund 317,175,613 496,956
AIM Constellation Fund 1,653,301,451 2,572,537
AIM Large Cap Basic Value Fund 17,589,402 29,960
AIM Large Cap Growth Fund 103,820,510 183,593
AIM Mid Cap Growth Fund 90,507,160 171,110
AIM Weingarten Fund 746,357,123 1,267,304
|
During the last fiscal year ended October 31, 2003, the Funds purchased securities issued by the following companies, which are "regular" brokers or dealers of one or more of the Funds identified below:
Fund/Issuer Security Market Value (as of October 31, 2003)
----------- -------- -------------------------------------
AIM Aggressive Growth Fund
Bear Stearns Cos. Inc. (The) Common Stock $ 38,125,000
Lehman Brothers Holdings Inc. Common Stock 39,600,000
AIM Blue Chip Fund
Goldman Sachs Group, Inc. (The) Common Stock 46,950,000
J.P. Morgan Chase & Co. Common Stock 52,055,000
Merrill Lynch & Co., Inc. Common Stock 47,360,000
Morgan Stanley Common Stock 46,639,500
AIM Charter Fund
Morgan Stanley Common Stock 45,542,100
AIM Constellation Fund
Bear Stearns Cos. Inc. (The) Common Stock 21,792,250
Goldman Sachs Group, Inc. (The) Common Stock 75,120,000
Merrill Lynch & Co., Inc. Common Stock 88,800,000
AIM Large Cap Basic Value Fund
J.P. Morgan Chase & Co. Common Stock 7,108,200
Merrill Lynch & Co., Inc. Common Stock 6,216,000
Morgan Stanley Common Stock 5,816,220
|
AIM Mid Cap Growth Fund Bear Stearns Cos., Inc. (The) Common Stock 1,525,000 Lehman Brothers Holdings Inc. Common Stock 1,080,000 AIM Weingarten Fund Charles Schwab Corp. (The) Common Stock 22,374,000 Goldman Sachs Group, Inc. (The) Common Stock 46,950,000 J.P. Morgan Chase & Co. Common Stock 32,310,000 Lehman Brothers Holdings Inc. Common Stock 39,600,000 Merrill Lynch & Co., Inc. Common Stock 29,600,000 |
APPENDIX J
PERFORMANCE DATA
The average annual total returns for each Fund for the one, five and ten year periods (or since inception if less than ten years) ended October 31, 2003 are as follows:
AVERAGE ANNUAL TOTAL RETURN
PERIODS ENDED
OCTOBER 31, 2003
----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 24.04% N/A N/A (2.92)% 03/15/02
AIM Blue Chip Fund 16.74 N/A N/A (6.82) 03/15/02
AIM Capital Development Fund 31.08 N/A N/A (1.50) 03/15/02
AIM Charter Fund 16.84 0.27% 7.90% N/A 07/30/91
AIM Constellation Fund 20.55 2.32 7.84 N/A 04/08/92
AIM Weingarten Fund 23.11 (5.39) 5.37 N/A 10/08/91
|
SINCE INCEPTION
CLASS A SHARES*: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------- ------ ------- -------- --------- ---------
AIM Large Cap Basic Value 16.94% N/A N/A 2.56% 06/30/99
AIM Large Cap Growth 13.85% N/A N/A -3.55% 03/01/99
AIM Mid Cap Growth 28.72% N/A N/A -4.18% 11/01/99
|
The cumulative total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) from inception through October 31, 2003 are as follows:
CUMULATIVE TOTAL RETURN
PERIODS ENDED
OCTOBER 31, 2003
----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 24.04% N/A N/A (4.72)% 03/15/02
AIM Blue Chip Fund 16.74% N/A N/A (10.88) 03/15/02
AIM Capital Development Fund 31.08% N/A N/A (2.43) 03/15/02
AIM Charter Fund 16.84% 1.36% 113.98% N/A 07/30/91
AIM Constellation Fund 20.55% 12.18% 112.78 N/A 04/08/92
AIM Weingarten Fund 23.11% (24.20) 68.71 N/A 10/08/91
|
SINCE INCEPTION
CLASS A SHARES*: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------- ------ ------- -------- --------- ---------
AIM Large Cap Basic Value 16.94% N/A N/A 11.60% 06/30/99
AIM Large Cap Growth 13.85% N/A N/A -15.51% 03/01/99
AIM Mid Cap Growth 28.72% N/A N/A -15.69% 11/01/99
|
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS)
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended October 31, 2003 are as follows:
PERIODS ENDED
OCTOBER 31, 2003
----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 24.04% N/A N/A (2.92)% 03/15/02
AIM Blue Chip Fund 16.74 N/A N/A (6.82) 03/15/02
AIM Capital Development Fund 31.08 N/A N/A (1.50) 03/15/02
AIM Charter Fund 16.84 (0.55)% 5.99% N/A 07/30/91
AIM Constellation Fund 20.55 1.10 6.71 N/A 04/08/92
AIM Weingarten Fund 23.11 (6.62) 2.91 N/A 10/08/91
|
SINCE INCEPTION
CLASS A SHARES*: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------- ------ ------- -------- --------- ---------
AIM Large Cap Basic Value 16.94% N/A N/A 2.23% 06/30/99
AIM Large Cap Growth 13.85% N/A N/A -3.55% 03/01/99
AIM Mid Cap Growth 28.72% N/A N/A -4.18% 11/01/99
|
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION)
The average annual total returns (after taxes on distributions and redemption) for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended October 31, 2003 are as follows:
PERIODS ENDED
OCTOBER 31, 2003
----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 15.63% N/A N/A (2.48)% 03/15/02
AIM Blue Chip Fund 10.88% N/A N/A (5.78) 03/15/02
AIM Capital Development Fund 20.20% N/A N/A (1.27) 03/15/02
AIM Charter Fund 10.94% 0.04% 5.86% N/A 07/30/91
AIM Constellation Fund 13.36% 1.95 6.65 N/A 04/08/92
AIM Weingarten Fund 15.02% (4.33) 3.77 N/A 10/08/91
|
SINCE INCEPTION
CLASS A SHARES*: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------- ------ ------- -------- --------- ---------
AIM Large Cap Basic Value 11.01% N/A N/A 1.97% 06/30/99
AIM Large Cap Growth 9.00% N/A N/A -2.98% 03/01/99
AIM Mid Cap Growth 18.67% N/A N/A -3.52% 11/01/99
|
* As of this date of this Statement of Additional Information, the Institutional Class shares for each fund has not commenced operations. As a result, performance data for Class A shares is shown here.
APPENDIX K
PENDING LITIGATION
The following civil lawsuits, including purported class action and shareholder derivative suits, involving one or more AIM or INVESCO Funds, AMVESCAP PLC ("AMVESCAP"), A I M Advisors, Inc. ("AIM") or INVESCO Funds Group, Inc. ("INVESCO") and certain related parties have been served as of February 23, 2004.
RAJ SANYAL, DERIVATELY ON BEHALF OF NATIONS INTERNATIONAL EQUITY FUND, V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER, CARL E. MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B. WALKER, EDMUND L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS, THOMAS S. WORD, JR., EDWARD D. BEDARD, GERALD MURPHY, ROBERT B. CARROLL, INVESCO
GLOBAL ASSET MANAGEMENT, PUTNAM INVESTMENT MANAGEMENT, BANK OF AMERICA
CORPORATION, MARSICO CAPITAL MANAGEMENT, LLC, BANC OF AMERICA ADVISORS,
LLC, BANC OF AMERICA CAPITAL MANAGEMENT, LLC, AND NATIONS FUNDS TRUST,
in the Superior Court Division, State of North Carolina (Civil Action
No. 03-CVS-19622), filed November 14, 2003. This claim alleges common
law breach of fiduciary duty; abuse of control; gross mismanagement;
waste of fund assets; and unjust enrichment. The plaintiff in this case
is seeking: injunctive relief; including imposition of a constructive
trust; damages; restitution and disgorgement; and costs and expenses,
including counsel fees and expert fees.
JOEL GOODMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in
the District Court, City and County of Denver, Colorado (Case Number
03CV9268), filed on December 5, 2003. This claim alleges breach of
fiduciary duty and aiding and abetting breach of fiduciary duty. The
plaintiffs in this case are seeking: injunctive relief; accounting for
all damages and for all profits and any special benefits obtained;
disgorgement; restitution and damages; costs and disbursements,
including attorneys' and experts' fees; and equitable relief.
L. SCOTT KARLIN, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP, INC. V.
AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC., AND CANARY CAPITAL PARTNERS, LTD., in the
United States District Court, District of Colorado (Civil Action No.
03-MK-2406), filed on November 28, 2003. This claim alleges violations
of Section 36(b) of the Investment Company Act of 1940, as amended
("Investment Company Act"), and common law breach of fiduciary duty.
The plaintiffs in this case are seeking damages and costs and expenses,
including attorneys' and experts' fees.
EDWARD LOWINGER AND SHARON LOWINGER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO
GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND,
INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO
U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO; INVESCO
LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS");
AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM
BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS
THE "INVESCO FUNDS REGISTRANTS"); AMVESCAP PLC, INVESCO FUNDS GROUP,
INC.; TIMOTHY MILLER; RAYMOND CUNNINGHAM; THOMAS KOLBE; EDWARD J.
STERN; AMERICAN SKANDIA INC.; BREAN MURRAY & CO., INC.; CANARY CAPITAL
PARTNERS, LLC; CANARY INVESTMENT MANAGEMENT, LLC; CANARY CAPITAL
PARTNERS, LTD.; AND JOHN DOES 1-100, in the United States District
Court, Southern District of New York (Civil Action No. 03-CV-9634),
filed on December 4, 2003. This claim alleges violations of: Sections
11 and 15 of the Securities Act of 1933, as amended (the "Securities
Act"); Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"); Rule 10b-5 under the Exchange Act; and
Section 206 of the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). The plaintiffs in this case are seeking: compensatory
damages; rescission; return of fees paid; accounting for wrongfully
gotten gains, profits and compensation; restitution and disgorgement;
and other costs and expenses, including counsel fees and expert fees.
RICHARD RAVER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 03-F-2441), filed on December 2,
2003. This claim alleges violations of: Sections 11 and 15 of the
Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule
10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of
the Investment Company Act. The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; attorneys' and experts' fees;
and other relief.
STEVEN B. EHRLICH, CUSTODIAN FOR ALEXA P. EHRLICH, UGTMA/FLORIDA, AND DENNY P. JACOBSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND),
INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR
FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND,
AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM INVESCO
TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY
FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN
FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH &
INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT
INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS
FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND,
INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOW AS THE "INVESCO
FUNDS"); AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS
INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC.,
AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY
KNOWN AS THE "INVESCO FUNDS REGISTRANTS"); AMVESCAP PLC, INVESCO FUNDS
GROUP, INC.; TIMOTHY MILLER; RAYMOND CUNNINGHAM; THOMAS KOLBE; EDWARD
J. STERN; AMERICAN SKANDIA INC.; BREAN MURRAY & CO., INC.; CANARY
CAPITAL PARTNERS, LLC; CANARY INVESTMENT MANAGEMENT, LLC; CANARY
CAPITAL PARTNERS, LTD.; AND JOHN DOES 1-100, in the United States
District Court, District of Colorado (Civil Action No. 03-N-2559),
filed on December 17, 2003. This claim alleges violations of: Sections
11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the
Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the
Advisers Act. The plaintiffs in this case are seeking: compensatory
damages; rescission; return of fees paid; accounting for wrongfully
gotten gains, profits and compensation; restitution and disgorgement;
and other costs and expenses, including counsel fees and expert fees.
PAT B. GORSUCH AND GEORGE L. GORSUCH V. INVESCO FUNDS GROUP, INC.; AND
AIM ADVISER, INC., in the United States District Court, District of
Colorado (Civil Action No. 03-MK-2612), filed on December 24, 2003.
This claim alleges violations of: Sections 15(a), 20(a) and 36(b) of
the Investment Company Act. The plaintiffs in this case are seeking:
rescission and/or voiding of the investment advisory agreements; return
of fees paid; damages; and other costs and expenses, including counsel
fees and expert fees.
LORI WEINRIB, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM COUNSELOR
SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC.; AMVESCAP PLC, TIMOTHY MILLER, RAYMOND
CUNNINGHAM, THOMAS KOLBE; EDWARD J. STERN; AMERICAN SKANDIA INC., BREAN
MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD; AND JOHN DOES 1-100, in
the United States District Court, Southern District of New York (Civil
Action No. 04-CV-00492), filed on January 21, 2004. This claim alleges
violations of: Sections 11 and 15 of the 1933 Act; Sections 10(b) and
20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and
Section 206 of the Advisers Act. The plaintiffs in this case are
seeking: compensatory damages; rescission; return of fees paid;
accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
CARL E. VONDER HAAR AND MARILYN P. MARTIN, ON BEHALF OF THEMSELVES AND
ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO
STOCK FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United States
District Court,
District of Colorado (Civil Action No. 04-CV-812), filed on February 5, 2004. The claim alleges common law breach of fiduciary duty; breach of contract; and tortuous interference with contract. The plaintiffs in this case are seeking: injunctive relief; damages; disgorgement; and costs and expenses, including counsel fees and expert fees.
Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be served or filed against the funds, INVESCO, AIM, AMVESCAP and related entities and individuals in the future. This statement of additional information will be supplemented periodically if any such lawsuits do arise.
FINANCIAL STATEMENTS
FS
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Aggressive Growth Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Aggressive Growth Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Aggressive Growth Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States.
Houston, Texas /s/ ERNST & YOUNG LLP December 16, 2003 |
FS-1
AGGRESSIVE GROWTH FUND
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.79%
AEROSPACE & DEFENSE-0.25%
L-3 Communications Holdings, Inc.(a) 125,000 $ 5,842,500
===========================================================================
AIR FREIGHT & LOGISTICS-1.65%
C.H. Robinson Worldwide, Inc. 500,000 19,590,000
---------------------------------------------------------------------------
Expeditors International of Washington, Inc. 500,000 18,770,000
===========================================================================
38,360,000
===========================================================================
APPAREL RETAIL-2.06%
Aeropostale, Inc.(a) 200,000 6,170,000
---------------------------------------------------------------------------
Chico's FAS, Inc.(a) 200,000 7,508,000
---------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 575,000 16,939,500
---------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 750,000 17,317,500
===========================================================================
47,935,000
===========================================================================
APPLICATION SOFTWARE-3.58%
Cognos, Inc. (Canada)(a) 500,000 17,235,000
---------------------------------------------------------------------------
Fair Isaac Corp.(a) 400,000 25,512,000
---------------------------------------------------------------------------
Macromedia, Inc.(a) 600,000 11,466,000
---------------------------------------------------------------------------
Mercury Interactive Corp.(a) 300,000 13,932,000
---------------------------------------------------------------------------
PeopleSoft, Inc.(a) 575,000 11,937,000
---------------------------------------------------------------------------
Reynolds & Reynolds Co. (The)-Class A 126,550 3,437,098
===========================================================================
83,519,098
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-5.28%
Investors Financial Services Corp. 1,250,000 44,162,500
---------------------------------------------------------------------------
Legg Mason, Inc. 650,000 54,112,500
---------------------------------------------------------------------------
T. Rowe Price Group Inc. 600,000 24,690,000
===========================================================================
122,965,000
===========================================================================
AUTO PARTS & EQUIPMENT-2.05%
Gentex Corp. 927,000 36,199,350
---------------------------------------------------------------------------
Lear Corp.(a) 200,000 11,618,000
===========================================================================
47,817,350
===========================================================================
BIOTECHNOLOGY-0.61%
Invitrogen Corp.(a) 225,000 14,307,750
===========================================================================
BROADCASTING & CABLE TV-0.88%
Univision Communications Inc.-Class A(a) 425,000 14,428,750
---------------------------------------------------------------------------
Westwood One, Inc.(a) 200,000 5,986,000
===========================================================================
20,414,750
===========================================================================
COMMUNICATIONS EQUIPMENT-3.72%
Avocent Corp.(a) 600,000 22,680,000
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Comverse Technology, Inc.(a) 1,000,000 $ 18,040,000
---------------------------------------------------------------------------
Polycom, Inc.(a) 325,000 6,509,750
---------------------------------------------------------------------------
QLogic Corp.(a) 225,000 12,611,250
---------------------------------------------------------------------------
UTStarcom, Inc.(a) 850,000 26,775,000
===========================================================================
86,616,000
===========================================================================
COMPUTER & ELECTRONICS RETAIL-1.50%
Best Buy Co., Inc. 600,000 34,986,000
===========================================================================
CONSTRUCTION & ENGINEERING-1.69%
Jacobs Engineering Group Inc.(a) 850,000 39,372,000
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.93%
AGCO Corp.(a) 1,200,000 21,600,000
===========================================================================
CONSUMER ELECTRONICS-0.55%
Harman International Industries, Inc. 100,000 12,820,000
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-8.39%
Affiliated Computer Services, Inc.-Class A(a) 500,000 24,465,000
---------------------------------------------------------------------------
Alliance Data Systems Corp.(a) 850,000 23,613,000
---------------------------------------------------------------------------
CheckFree Corp.(a) 500,000 13,765,000
---------------------------------------------------------------------------
DST Systems, Inc.(a) 300,000 11,346,000
---------------------------------------------------------------------------
Fiserv, Inc.(a) 1,300,000 45,916,000
---------------------------------------------------------------------------
Iron Mountain Inc.(a) 500,000 19,120,000
---------------------------------------------------------------------------
Paychex, Inc. 750,000 29,190,000
---------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 1,000,000 28,050,000
===========================================================================
195,465,000
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.83%
Apollo Group, Inc.-Class A(a) 400,000 25,412,000
---------------------------------------------------------------------------
Corporate Executive Board Co. (The)(a) 300,000 15,303,000
---------------------------------------------------------------------------
CoStar Group Inc.(a) 52,100 1,961,565
===========================================================================
42,676,565
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.67%
Rockwell Automation, Inc. 500,000 15,525,000
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.96%
National Instruments Corp. 250,000 10,645,000
---------------------------------------------------------------------------
Waters Corp.(a) 375,000 11,786,250
===========================================================================
22,431,250
===========================================================================
|
FS-2
MARKET
SHARES VALUE
---------------------------------------------------------------------------
EMPLOYMENT SERVICES-1.22%
Robert Half International Inc.(a) 1,200,000 $ 28,332,000
===========================================================================
GENERAL MERCHANDISE STORES-0.50%
99 Cents Only Stores(a) 200,000 5,954,000
---------------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 150,000 5,727,000
===========================================================================
11,681,000
===========================================================================
HEALTH CARE DISTRIBUTORS-2.47%
Omnicare, Inc. 1,000,000 38,340,000
---------------------------------------------------------------------------
Patterson Dental Co.(a) 300,000 19,194,000
===========================================================================
57,534,000
===========================================================================
HEALTH CARE EQUIPMENT-5.80%
ResMed Inc.(a) 1,000,000 41,770,000
---------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 400,000 23,264,000
---------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 300,000 19,182,000
---------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 800,000 51,048,000
===========================================================================
135,264,000
===========================================================================
HEALTH CARE FACILITIES-1.19%
Health Management Associates, Inc.-Class A 1,250,000 27,687,500
===========================================================================
HEALTH CARE SERVICES-3.02%
Caremark Rx, Inc.(a) 1,250,000 31,312,500
---------------------------------------------------------------------------
Express Scripts, Inc.(a) 500,000 27,460,000
---------------------------------------------------------------------------
Lincare Holdings Inc.(a) 300,000 11,682,000
===========================================================================
70,454,500
===========================================================================
HEALTH CARE SUPPLIES-2.86%
Coopers Cos., Inc. (The) 375,000 16,293,750
---------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 1,250,000 50,312,500
===========================================================================
66,606,250
===========================================================================
INDUSTRIAL CONGLOMERATES-0.22%
Carlisle Cos. Inc. 88,300 5,064,005
===========================================================================
INDUSTRIAL MACHINERY-2.78%
Danaher Corp. 600,000 49,710,000
---------------------------------------------------------------------------
Eaton Corp. 150,000 15,036,000
===========================================================================
64,746,000
===========================================================================
INTERNET RETAIL-0.24%
eBay Inc.(a) 100,000 5,594,000
===========================================================================
INVESTMENT BANKING & BROKERAGE-3.34%
Bear Stearns Cos. Inc. (The) 500,000 38,125,000
---------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 550,000 39,600,000
===========================================================================
77,725,000
===========================================================================
IT CONSULTING & OTHER SERVICES-0.96%
CACI International Inc.-Class A(a) 450,000 22,288,500
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
LEISURE PRODUCTS-0.84%
Marvel Enterprises, Inc.(a) 666,200 $ 19,619,590
===========================================================================
MANAGED HEALTH CARE-0.25%
Aetna Inc. 100,000 5,741,000
===========================================================================
MULTI-LINE INSURANCE-0.21%
HCC Insurance Holdings, Inc. 167,600 4,883,864
===========================================================================
OFFICE SERVICES & SUPPLIES-0.61%
Moore Wallace Inc. (Canada)(a) 1,000,000 14,300,000
===========================================================================
OIL & GAS DRILLING-3.77%
ENSCO International Inc. 1,000,000 26,350,000
---------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 700,000 26,460,000
---------------------------------------------------------------------------
Patterson-UTI Energy, Inc.(a) 800,000 22,872,000
---------------------------------------------------------------------------
Pride International, Inc.(a) 750,000 12,285,000
===========================================================================
87,967,000
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.24%
Cooper Cameron Corp.(a) 450,000 19,269,000
---------------------------------------------------------------------------
National-Oilwell, Inc.(a) 750,000 14,302,500
---------------------------------------------------------------------------
Smith International, Inc.(a) 500,000 18,615,000
===========================================================================
52,186,500
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.33%
Newfield Exploration Co.(a) 425,000 16,885,250
---------------------------------------------------------------------------
XTO Energy, Inc. 600,000 14,202,000
===========================================================================
31,087,250
===========================================================================
PHARMACEUTICALS-1.91%
Medicis Pharmaceutical Corp.-Class A 500,000 31,675,000
---------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 200,000 12,850,000
===========================================================================
44,525,000
===========================================================================
PUBLISHING-1.64%
Belo Corp.-Class A 500,000 13,630,000
---------------------------------------------------------------------------
Getty Images, Inc.(a) 550,000 24,585,000
===========================================================================
38,215,000
===========================================================================
REGIONAL BANKS-0.74%
Southwest Bancorp. of Texas, Inc. 300,000 10,773,000
---------------------------------------------------------------------------
TCF Financial Corp. 125,000 6,522,500
===========================================================================
17,295,500
===========================================================================
RESTAURANTS-2.35%
Brinker International, Inc.(a) 500,000 15,915,000
---------------------------------------------------------------------------
CBRL Group, Inc. 71,500 2,770,625
---------------------------------------------------------------------------
Cheesecake Factory Inc. (The)(a) 300,000 11,982,000
---------------------------------------------------------------------------
Sonic Corp.(a) 300,050 8,344,391
---------------------------------------------------------------------------
|
FS-3
MARKET
SHARES VALUE
---------------------------------------------------------------------------
RESTAURANTS-(CONTINUED)
Starbucks Corp.(a) 500,000 $ 15,800,000
===========================================================================
54,812,016
===========================================================================
SEMICONDUCTORS-5.13%
Altera Corp.(a) 750,000 15,172,500
---------------------------------------------------------------------------
AMIS Holdings, Inc.(a) 343,300 6,917,495
---------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 350,000 11,182,500
---------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 350,000 11,749,500
---------------------------------------------------------------------------
Intersil Corp.-Class A 500,000 12,895,000
---------------------------------------------------------------------------
Linear Technology Corp. 575,000 24,500,750
---------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 400,000 17,548,000
---------------------------------------------------------------------------
Microchip Technology Inc. 600,000 19,626,000
===========================================================================
119,591,745
===========================================================================
SPECIALIZED FINANCE-1.60%
Chicago Mercantile Exchange (The) 250,000 16,987,500
---------------------------------------------------------------------------
Moody's Corp. 350,000 20,240,500
===========================================================================
37,228,000
===========================================================================
SPECIALTY CHEMICALS-0.72%
Valspar Corp. (The) 350,000 16,695,000
===========================================================================
SPECIALTY STORES-5.99%
Bed Bath & Beyond Inc.(a) 750,000 31,680,000
---------------------------------------------------------------------------
CarMax, Inc.(a) 300,000 9,453,000
---------------------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 150,000 2,884,500
---------------------------------------------------------------------------
Regis Corp. 303,000 11,520,060
---------------------------------------------------------------------------
Staples, Inc.(a) 1,300,000 34,866,000
---------------------------------------------------------------------------
Tractor Supply Co.(a) 500,000 20,955,000
---------------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 800,000 28,264,000
===========================================================================
139,622,560
===========================================================================
SYSTEMS SOFTWARE-1.42%
Adobe Systems Inc. 300,000 13,152,000
---------------------------------------------------------------------------
Symantec Corp.(a) 300,000 19,995,000
===========================================================================
33,147,000
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
TECHNOLOGY DISTRIBUTORS-1.93%
CDW Corp. 750,000 $ 45,037,500
===========================================================================
THRIFTS & MORTGAGE FINANCE-2.01%
Doral Financial Corp. (Puerto Rico) 350,000 17,675,000
---------------------------------------------------------------------------
New York Community Bancorp, Inc. 400,000 14,480,000
---------------------------------------------------------------------------
Radian Group Inc. 278,600 14,737,940
===========================================================================
46,892,940
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-1.91%
Fastenal Co. 1,000,000 44,470,000
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,724,243,328) 2,278,947,483
===========================================================================
MONEY MARKET FUNDS-3.24%
STIC Liquid Assets Portfolio(b) 37,783,111 37,783,111
---------------------------------------------------------------------------
STIC Prime Portfolio(b) 37,783,111 37,783,111
===========================================================================
Total Money Market Funds (Cost
$75,566,222) 75,566,222
===========================================================================
TOTAL INVESTMENTS-101.03% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,799,809,550) 2,354,513,705
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-22.43%
STIC Liquid Assets Portfolio(b)(c) 261,330,936 261,330,936
---------------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 261,330,936 261,330,936
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $522,661,872) 522,661,872
===========================================================================
TOTAL INVESTMENTS-123.46% (Cost
$2,322,471,422) 2,877,175,577
===========================================================================
OTHER ASSETS LESS LIABILITIES-(23.46%) (546,645,008)
===========================================================================
NET ASSETS-100.00% $2,330,530,569
___________________________________________________________________________
===========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-4
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$1,724,243,328)* $ 2,278,947,483
------------------------------------------------------------
Investments in affiliated money market
funds (cost $598,228,094) 598,228,094
------------------------------------------------------------
Cash 1,198,825
------------------------------------------------------------
Receivables for:
Investments sold 49,660,832
------------------------------------------------------------
Fund shares sold 1,158,837
------------------------------------------------------------
Dividends 324,508
------------------------------------------------------------
Investment for deferred compensation plan 102,238
------------------------------------------------------------
Other assets 65,615
============================================================
Total assets 2,929,686,432
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 68,040,705
------------------------------------------------------------
Fund shares reacquired 5,872,672
------------------------------------------------------------
Deferred compensation plan 102,238
------------------------------------------------------------
Collateral upon return of securities
loaned 522,661,872
------------------------------------------------------------
Accrued distribution fees 697,507
------------------------------------------------------------
Accrued trustees' fees 133,783
------------------------------------------------------------
Accrued transfer agent fees 1,310,137
------------------------------------------------------------
Accrued operating expenses 336,949
============================================================
Total liabilities 599,155,863
============================================================
Net assets applicable to shares outstanding $ 2,330,530,569
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 2,823,914,593
------------------------------------------------------------
Undistributed net investment income (loss) (235,341)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (1,047,852,838)
------------------------------------------------------------
Unrealized appreciation of investment
securities 554,704,155
============================================================
$ 2,330,530,569
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,983,599,801
____________________________________________________________
============================================================
Class B $ 262,098,347
____________________________________________________________
============================================================
Class C $ 81,079,129
____________________________________________________________
============================================================
Class R $ 1,164,264
____________________________________________________________
============================================================
Institutional Class $ 2,589,028
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED
NUMBER OF SHARES AUTHORIZED:
Class A 220,535,728
____________________________________________________________
============================================================
Class B 30,408,663
____________________________________________________________
============================================================
Class C 9,408,893
____________________________________________________________
============================================================
Class R 129,953
____________________________________________________________
============================================================
Institutional Class 285,210
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 8.99
------------------------------------------------------------
Offering price per share:
(Net asset value of $8.99 divided by
94.50%) $ 9.51
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.62
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.62
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 8.96
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.08
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $513,411,417 were on loan to brokers.
See Notes to Financial Statements.
FS-5
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $25,050) $ 5,010,187
--------------------------------------------------------------------------
Dividends from affiliated money market funds 966,680
--------------------------------------------------------------------------
Securities lending 1,187,469
==========================================================================
Total investment income 7,164,336
==========================================================================
EXPENSES:
Advisory fees 13,458,191
--------------------------------------------------------------------------
Administrative services fees 453,825
--------------------------------------------------------------------------
Custodian fees 148,987
--------------------------------------------------------------------------
Distribution fees -- Class A 4,512,997
--------------------------------------------------------------------------
Distribution fees -- Class B 2,320,962
--------------------------------------------------------------------------
Distribution fees -- Class C 720,696
--------------------------------------------------------------------------
Distribution fees -- Class R 2,722
--------------------------------------------------------------------------
Transfer agent fees 7,339,962
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 69
--------------------------------------------------------------------------
Trustees' fees 45,972
--------------------------------------------------------------------------
Other 767,241
==========================================================================
Total expenses 29,771,624
==========================================================================
Less: Fees waived and expense offset arrangements (51,005)
==========================================================================
Net expenses 29,720,619
==========================================================================
Net investment income (loss) (22,556,283)
==========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment securities 61,969,001
--------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 408,592,565
==========================================================================
Net gain from investment securities 470,561,566
==========================================================================
Net increase in net assets resulting from operations $448,005,283
__________________________________________________________________________
==========================================================================
|
See Notes to Financial Statements.
FS-6
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (22,556,283) $ (29,737,807)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 61,969,001 (454,400,428)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 408,592,565 70,396,760
==============================================================================================
Net increase (decrease) in net assets resulting from
operations 448,005,283 (413,741,475)
==============================================================================================
Share transactions-net:
Class A (198,927,862) (368,156,521)
----------------------------------------------------------------------------------------------
Class B (13,011,938) (19,209,543)
----------------------------------------------------------------------------------------------
Class C (6,417,966) (8,446,307)
----------------------------------------------------------------------------------------------
Class R 879,113 133,795
----------------------------------------------------------------------------------------------
Institutional Class 1,928,983 145,043
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (215,549,670) (395,533,533)
==============================================================================================
Net increase (decrease) in net assets 232,455,613 (809,275,008)
==============================================================================================
NET ASSETS:
Beginning of year 2,098,074,956 2,907,349,964
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(235,341) and $(208,878) for 2003 and 2002,
respectively) $2,330,530,569 $2,098,074,956
______________________________________________________________________________________________
==============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Aggressive Growth Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and
FS-7
commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- 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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first $150 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $150 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $16,521
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $453,825 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") formerly known as A I M Funds Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $3,664,649 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $4,512,997, $2,320,962 $720,696 and $2,722, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $247,028 in front-end sales commissions from the sale of Class A shares and $54,841, $0, $8,182 and $0 from Class A,
FS-8
Class B and Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $33,957 and reductions in custodian fees of $527 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $34,484.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $5,599 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $513,411,417 were on loan to brokers. The loans were secured by cash collateral of $522,661,872 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2003, the Fund received fees of $1,187,469 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002.
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Unrealized appreciation -- investments $ 547,008,172 ------------------------------------------------------------ Temporary book/tax differences (235,341) ------------------------------------------------------------ Capital loss carryforward (1,040,156,855) ------------------------------------------------------------ Shares of beneficial interest 2,823,914,593 ============================================================ Total net assets $ 2,330,530,569 ____________________________________________________________ ============================================================ |
FS-9
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------------------------------------------------------
October 31, 2009 $ 576,417,831
------------------------------------------------------------
October 31, 2010 463,739,024
============================================================
Total capital loss carryforward $1,040,156,855
____________________________________________________________
============================================================
|
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $1,591,626,604 and $1,744,731,182, respectively.
UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $554,050,882
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (7,042,710)
===========================================================
Net unrealized appreciation of investment
securities $547,008,172
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $2,330,167,405.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of the disallowance of net operating losses on October 31, 2003, undistributed net investment income (loss) was increased by $22,529,820, undistributed net realized gains remained unchanged and shares of beneficial interest decreased by $22,529,820. This reclassification had no effect on the net assets of the Fund.
NOTE 10--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2003 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 35,791,336 $ 277,895,468 44,066,976 $ 384,377,775
--------------------------------------------------------------------------------------------------------------------------
Class B 4,508,173 33,128,293 6,507,666 55,189,130
--------------------------------------------------------------------------------------------------------------------------
Class C 2,072,120 15,430,661 2,934,855 24,752,456
--------------------------------------------------------------------------------------------------------------------------
Class R* 162,296 1,283,289 18,814 133,820
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** 275,456 2,002,058 18,865 145,043
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 337,998 2,617,107 182,647 1,563,408
--------------------------------------------------------------------------------------------------------------------------
Class B (351,540) (2,617,107) (188,487) (1,563,408)
==========================================================================================================================
Reacquired:
Class A (62,095,032) (479,440,437) (87,574,389) (754,097,704)
--------------------------------------------------------------------------------------------------------------------------
Class B (5,947,043) (43,523,124) (8,963,129) (72,835,265)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,982,429) (21,848,627) (4,058,002) (33,198,763)
--------------------------------------------------------------------------------------------------------------------------
Class R* (51,154) (404,176) (3) (25)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** (9,111) (73,075) -- --
==========================================================================================================================
(28,288,930) $(215,549,670) (47,054,187) $(395,533,533)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002.
FS-10
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A(a)
---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.30 $ 8.68 $ 18.41 $ 13.90 $ 10.04
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(b) (0.09)(b) (0.09)(b) (0.13) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.76 (1.29) (6.34) 11.08 4.05
=================================================================================================================================
Total from investment operations 1.69 (1.38) (6.43) 10.95 3.96
=================================================================================================================================
Less distributions:
Distributions from net realized gains -- -- (3.30) (6.44) (0.10)
=================================================================================================================================
Net asset value, end of period $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 23.15% (15.90)% (40.51)% 47.53% 39.73%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,983,600 $1,798,318 $2,516,407 $4,444,515 $2,808,451
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.30%(d) 1.32% 1.17% 1.04% 1.09%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.96)%(d) (1.00)% (0.79)% (0.77)% (0.69)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 78% 68% 89% 79% 75%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Per share information and distributions prior to October 31, 1999 have
been restated to reflect a 4 for 1 stock split, effected in the form of
a 300% stock dividend, on July 14, 2000.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $1,805,198,791.
CLASS B(a)
----------------------------------------------------------------
MARCH 1, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.04 $ 8.45 $ 18.12 $ 13.81 $ 10.85
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(b) (0.15)(b) (0.17)(b) (0.29) (0.07)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.71 (1.26) (6.20) 11.04 3.03
==============================================================================================================================
Total from investment operations 1.58 (1.41) (6.37) 10.75 2.96
==============================================================================================================================
Less distributions:
Distributions from net realized gains -- -- (3.30) (6.44) --
==============================================================================================================================
Net asset value, end of period $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(c) 22.44% (16.69)% (40.90)% 46.29% 27.27%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $262,098 $226,806 $294,303 $374,010 $24,914
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets 2.05%(d) 2.07% 1.94% 1.86% 2.08%(e)
==============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.71)%(d) (1.75)% (1.55)% (1.59)% (1.68)%(e)
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(f) 78% 68% 89% 79% 75%
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(a) Per share information and distributions prior to October 31, 1999 have
been restated to reflect a 4 for 1 stock split, effected in the form of
a 300% stock dividend, on July 14, 2000.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are based on average daily net assets of $232,096,158.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-11
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C(a)
-------------------------------------------------------------
MARCH 1, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
-------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.04 $ 8.45 $ 18.11 $ 13.81 $10.85
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(b) (0.15)(b) (0.17)(b) (0.29) (0.07)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.71 (1.26) (6.19) 11.03 3.03
===========================================================================================================================
Total from investment operations 1.58 (1.41) (6.36) 10.74 2.96
===========================================================================================================================
Less distributions:
Distributions from net realized gains -- -- (3.30) (6.44) --
===========================================================================================================================
Net asset value, end of period $ 8.62 $ 7.04 $ 8.45 $ 18.11 $13.81
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(c) 22.44% (16.69)% (40.86)% 46.21% 27.27%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $81,079 $72,676 $96,640 $120,591 $6,807
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 2.05%(d) 2.07% 1.94% 1.86% 2.08%(e)
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.71)%(d) (1.75)% (1.55)% (1.59)% (1.68)%(e)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(f) 78% 68% 89% 79% 75%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(a) Per share information and distributions prior to October 31, 1999 have
been restated to reflect a 4 for 1 stock split, effected in the form of
a 300% stock dividend, on July 14, 2000.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are based on average daily net assets of $72,069,646.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS R
-------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.29 $ 8.89
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.04)(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.77 (1.56)
=============================================================================================
Total from investment operations 1.67 (1.60)
=============================================================================================
Net asset value, end of period $ 8.96 $ 7.29
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 22.91% (18.00)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,164 $ 137
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 1.55%(c) 1.62%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (1.21)%(c) (1.30)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 78% 68%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $544,422.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-12
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
--------------------------------
MARCH 15, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.32 $ 9.53
----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.02)(a)
----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.79 (2.19)
==============================================================================================
Total from investment operations 1.76 (2.21)
==============================================================================================
Net asset value, end of period $ 9.08 $ 7.32
______________________________________________________________________________________________
==============================================================================================
Total return(b) 24.04% (23.19)%
______________________________________________________________________________________________
==============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,589 $ 138
______________________________________________________________________________________________
==============================================================================================
Ratio of expenses to average net assets 0.71%(c) 0.81%(d)
==============================================================================================
Ratio of net investment income (loss) to average net assets (0.37)%(c) (0.49)%(d)
______________________________________________________________________________________________
==============================================================================================
Portfolio turnover rate(e) 78% 68%
______________________________________________________________________________________________
==============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,401,489.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-13
NOTE 12--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-14
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Blue Chip Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Blue Chip Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Blue Chip Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Houston, Texas
December 16, 2003
|
FS-15
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.27%
ADVERTISING-1.08%
Omnicom Group Inc. 400,000 $ 31,920,000
==========================================================================
AEROSPACE & DEFENSE-1.94%
Lockheed Martin Corp. 325,000 15,067,000
--------------------------------------------------------------------------
United Technologies Corp. 500,000 42,345,000
==========================================================================
57,412,000
==========================================================================
ALUMINUM-0.64%
Alcoa Inc. 600,000 18,942,000
==========================================================================
APPAREL RETAIL-0.61%
Gap, Inc. (The) 950,000 18,126,000
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.48%
Franklin Resources, Inc. 300,000 14,226,000
==========================================================================
BIOTECHNOLOGY-1.88%
Amgen Inc.(a) 900,000 55,584,000
==========================================================================
BREWERS-0.50%
Anheuser-Busch Cos., Inc. 300,000 14,778,000
==========================================================================
BROADCASTING & CABLE TV-0.52%
Clear Channel Communications, Inc. 375,000 15,307,500
==========================================================================
CASINOS & GAMING-0.69%
International Game Technology 625,000 20,468,750
==========================================================================
COMMUNICATIONS EQUIPMENT-2.91%
Cisco Systems, Inc.(a) 4,100,000 86,018,000
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.99%
Best Buy Co., Inc. 500,000 29,155,000
==========================================================================
COMPUTER HARDWARE-2.76%
Dell Inc.(a) 1,450,000 52,374,000
--------------------------------------------------------------------------
International Business Machines Corp. 325,000 29,081,000
==========================================================================
81,455,000
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.84%
EMC Corp.(a) 1,800,000 24,912,000
==========================================================================
CONSUMER FINANCE-2.90%
American Express Co. 900,000 42,237,000
--------------------------------------------------------------------------
MBNA Corp. 850,000 21,037,500
--------------------------------------------------------------------------
SLM Corp. 575,000 22,517,000
==========================================================================
85,791,500
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES-1.68%
First Data Corp. 850,000 $ 30,345,000
--------------------------------------------------------------------------
Fiserv, Inc.(a) 550,000 19,426,000
==========================================================================
49,771,000
==========================================================================
DIVERSIFIED BANKS-2.66%
Bank of America Corp. 425,000 32,185,250
--------------------------------------------------------------------------
Wells Fargo & Co. 825,000 46,464,000
==========================================================================
78,649,250
==========================================================================
DIVERSIFIED CAPITAL MARKETS-1.76%
J.P. Morgan Chase & Co. 1,450,000 52,055,000
==========================================================================
DIVERSIFIED CHEMICALS-0.27%
E. I. du Pont de Nemours & Co. 200,000 8,080,000
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.61%
Apollo Group, Inc.-Class A(a) 525,000 33,353,250
--------------------------------------------------------------------------
H&R Block, Inc. 300,000 14,127,000
==========================================================================
47,480,250
==========================================================================
ELECTRIC UTILITIES-1.56%
Dominion Resources, Inc. 250,000 15,400,000
--------------------------------------------------------------------------
FPL Group, Inc. 250,000 15,935,000
--------------------------------------------------------------------------
Southern Co. (The) 500,000 14,900,000
==========================================================================
46,235,000
==========================================================================
FOOD DISTRIBUTORS-0.85%
Sysco Corp. 750,000 25,245,000
==========================================================================
FOOTWEAR-0.54%
NIKE, Inc.-Class B 250,000 15,975,000
==========================================================================
GENERAL MERCHANDISE STORES-0.74%
Target Corp. 550,000 21,857,000
==========================================================================
HEALTH CARE EQUIPMENT-4.70%
Boston Scientific Corp.(a) 700,000 47,404,000
--------------------------------------------------------------------------
Medtronic, Inc. 850,000 38,734,500
--------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 275,000 15,994,000
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 575,000 36,690,750
==========================================================================
138,823,250
==========================================================================
HOME IMPROVEMENT RETAIL-1.94%
Home Depot, Inc. (The) 1,550,000 57,458,500
==========================================================================
HOTELS, RESORTS & CRUISE LINES-0.56%
Carnival Corp. (Panama) 475,000 16,582,250
==========================================================================
|
FS-16
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-2.89%
Colgate-Palmolive Co. 450,000 $ 23,935,500
--------------------------------------------------------------------------
Procter & Gamble Co. (The) 625,000 61,431,250
==========================================================================
85,366,750
==========================================================================
HYPERMARKETS & SUPER CENTERS-3.29%
Wal-Mart Stores, Inc. 1,650,000 97,267,500
==========================================================================
INDUSTRIAL CONGLOMERATES-3.02%
3M Co. 195,000 15,379,650
--------------------------------------------------------------------------
General Electric Co. 2,550,000 73,975,500
==========================================================================
89,355,150
==========================================================================
INDUSTRIAL GASES-0.54%
Air Products & Chemicals, Inc. 350,000 15,893,500
==========================================================================
INDUSTRIAL MACHINERY-0.52%
Danaher Corp. 185,000 15,327,250
==========================================================================
INTEGRATED OIL & GAS-2.29%
Exxon Mobil Corp. 1,850,000 67,673,000
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.61%
SBC Communications Inc. 750,000 17,985,000
==========================================================================
INTERNET RETAIL-0.76%
eBay Inc.(a) 400,000 22,376,000
==========================================================================
INVESTMENT BANKING & BROKERAGE-4.77%
Goldman Sachs Group, Inc. (The) 500,000 46,950,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 800,000 47,360,000
--------------------------------------------------------------------------
Morgan Stanley 850,000 46,639,500
==========================================================================
140,949,500
==========================================================================
LIFE & HEALTH INSURANCE-0.75%
Prudential Financial, Inc. 575,000 22,218,000
==========================================================================
MANAGED HEALTH CARE-1.46%
UnitedHealth Group Inc. 850,000 43,248,000
==========================================================================
MOVIES & ENTERTAINMENT-1.48%
Viacom Inc.-Class B 1,100,000 43,857,000
==========================================================================
MULTI-LINE INSURANCE-1.75%
American International Group, Inc. 850,000 51,705,500
==========================================================================
OIL & GAS DRILLING-1.00%
ENSCO International Inc. 550,000 14,492,500
--------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 400,000 15,120,000
==========================================================================
29,612,500
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-0.76%
Schlumberger Ltd. (Netherlands) 475,000 $ 22,310,750
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.85%
Citigroup Inc. 2,400,000 113,760,000
==========================================================================
PHARMACEUTICALS-6.69%
Allergan, Inc. 325,000 24,576,500
--------------------------------------------------------------------------
Johnson & Johnson 750,000 37,747,500
--------------------------------------------------------------------------
Pfizer Inc. 2,350,000 74,260,000
--------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 375,000 21,333,750
--------------------------------------------------------------------------
Wyeth 900,000 39,726,000
==========================================================================
197,643,750
==========================================================================
RAILROADS-0.66%
Canadian National Railway Co. (Canada) 325,000 19,565,000
==========================================================================
REGIONAL BANKS-0.74%
Fifth Third Bancorp 375,000 21,735,000
==========================================================================
RESTAURANTS-0.34%
McDonald's Corp. 400,000 10,004,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-2.93%
Applied Materials, Inc.(a) 1,500,000 35,055,000
--------------------------------------------------------------------------
KLA-Tencor Corp.(a) 450,000 25,798,500
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 625,000 25,806,250
==========================================================================
86,659,750
==========================================================================
SEMICONDUCTORS-6.94%
Analog Devices, Inc.(a) 650,000 28,814,500
--------------------------------------------------------------------------
Intel Corp. 2,500,000 82,625,000
--------------------------------------------------------------------------
Linear Technology Corp. 650,000 27,696,500
--------------------------------------------------------------------------
Microchip Technology Inc. 800,000 26,168,000
--------------------------------------------------------------------------
Texas Instruments Inc. 500,000 14,460,000
--------------------------------------------------------------------------
Xilinx, Inc.(a) 800,000 25,360,000
==========================================================================
205,124,000
==========================================================================
SOFT DRINKS-1.28%
Coca-Cola Co. (The) 400,000 18,560,000
--------------------------------------------------------------------------
PepsiCo, Inc. 400,000 19,128,000
==========================================================================
37,688,000
==========================================================================
SPECIALTY STORES-1.79%
Bed Bath & Beyond Inc.(a) 725,000 30,624,000
--------------------------------------------------------------------------
Staples, Inc.(a) 825,000 22,126,500
==========================================================================
52,750,500
==========================================================================
SYSTEMS SOFTWARE-6.47%
Computer Associates International, Inc. 675,000 15,876,000
--------------------------------------------------------------------------
Microsoft Corp. 3,900,000 101,985,000
--------------------------------------------------------------------------
|
FS-17
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Oracle Corp.(a) 2,500,000 $ 29,900,000
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 1,200,000 43,380,000
==========================================================================
191,141,000
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.09%
Fannie Mae 450,000 32,260,500
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.99%
AT&T Wireless Services Inc.(a) 1,100,000 7,975,000
--------------------------------------------------------------------------
Vodafone Group PLC-ADR (United Kingdom) 1,000,000 21,150,000
==========================================================================
29,125,000
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,273,576,585) 2,874,909,150
==========================================================================
MONEY MARKET FUNDS-2.18%
STIC Liquid Assets Portfolio(b) 32,255,406 32,255,406
--------------------------------------------------------------------------
STIC Prime Portfolio(b) 32,255,406 32,255,406
==========================================================================
Total Money Market Funds (Cost
$64,510,812) 64,510,812
==========================================================================
TOTAL INVESTMENTS-99.45% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,338,087,397) 2,939,419,962
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.02%
STIC Liquid Assets Portfolio(b)(c) 447,700 $ 447,700
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $447,700) 447,700
==========================================================================
TOTAL INVESTMENTS-99.47% (Cost
$2,338,535,097) 2,939,867,662
==========================================================================
OTHER ASSETS LESS LIABILITIES-0.53% 15,680,944
==========================================================================
NET ASSETS-100.00% $2,955,548,606
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-18
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$2,273,576,585)* $2,874,909,150
------------------------------------------------------------
Investments in affiliated money market funds
(cost $64,958,512) 64,958,512
------------------------------------------------------------
Receivables for:
Investments sold 24,683,025
------------------------------------------------------------
Fund shares sold 2,304,821
------------------------------------------------------------
Dividends 3,002,219
------------------------------------------------------------
Investment for deferred compensation plan 85,703
------------------------------------------------------------
Other assets 89,262
============================================================
Total assets 2,970,032,692
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 2,960,690
------------------------------------------------------------
Fund shares reacquired 6,778,210
------------------------------------------------------------
Deferred compensation plan 85,703
------------------------------------------------------------
Collateral upon return of securities
loaned 447,700
------------------------------------------------------------
Accrued distribution fees 1,754,494
------------------------------------------------------------
Accrued trustees' fees 113,708
------------------------------------------------------------
Accrued transfer agent fees 1,879,182
------------------------------------------------------------
Accrued operating expenses 464,399
============================================================
Total liabilities 14,484,086
============================================================
Net assets applicable to shares outstanding $2,955,548,606
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $4,174,409,315
------------------------------------------------------------
Undistributed net investment income (loss) (193,930)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and futures contracts (1,819,999,344)
------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 601,332,565
============================================================
$2,955,548,606
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,439,517,589
____________________________________________________________
============================================================
Class B $1,223,820,934
____________________________________________________________
============================================================
Class C $ 290,396,300
____________________________________________________________
============================================================
Class R $ 1,577,836
____________________________________________________________
============================================================
Investor Class $ 100,222
____________________________________________________________
============================================================
Institutional Class $ 135,725
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 134,716,761
____________________________________________________________
============================================================
Class B 119,762,062
____________________________________________________________
============================================================
Class C 28,419,655
____________________________________________________________
============================================================
Class R 147,951
____________________________________________________________
============================================================
Investor Class 9,378
____________________________________________________________
============================================================
Institutional Class 12,560
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 10.69
------------------------------------------------------------
Offering price per share:
(Net asset value of $10.69 divided by
94.50%) $ 11.31
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.22
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.22
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 10.66
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 10.69
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 10.81
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $431,970
were on loan to brokers.
See Notes to Financial Statements.
FS-19
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $79,735) $ 35,405,963
---------------------------------------------------------------------------
Dividends from affiliated money market funds 985,598
---------------------------------------------------------------------------
Interest 35,871
---------------------------------------------------------------------------
Securities lending 34,455
===========================================================================
Total investment income 36,461,887
===========================================================================
EXPENSES:
Advisory fees 17,924,075
---------------------------------------------------------------------------
Administrative services fees 540,113
---------------------------------------------------------------------------
Custodian fees 190,013
---------------------------------------------------------------------------
Distribution fees:
Class A 4,741,551
---------------------------------------------------------------------------
Class B 11,597,496
---------------------------------------------------------------------------
Class C 2,827,049
---------------------------------------------------------------------------
Class R 2,613
---------------------------------------------------------------------------
Investor Class 10
---------------------------------------------------------------------------
Transfer agent fees 11,540,164
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 81
---------------------------------------------------------------------------
Trustees' fees 58,866
---------------------------------------------------------------------------
Other 1,213,386
===========================================================================
Total expenses 50,635,417
===========================================================================
Less: Fees waived and expense offset arrangements (72,046)
===========================================================================
Net expenses 50,563,371
===========================================================================
Net investment income (loss) (14,101,484)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (109,521,399)
---------------------------------------------------------------------------
Foreign currencies 1,362
---------------------------------------------------------------------------
Futures contracts 4,362,825
===========================================================================
(105,157,212)
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 520,451,864
---------------------------------------------------------------------------
Foreign currencies (538)
---------------------------------------------------------------------------
Futures contracts (1,164,391)
===========================================================================
519,286,935
===========================================================================
Net gain from investment securities, foreign currencies and
futures contracts 414,129,723
===========================================================================
Net increase in net assets resulting from operations $ 400,028,239
___________________________________________________________________________
===========================================================================
|
See Notes to Financial Statements.
FS-20
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
-----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (14,101,484) $ (26,181,399)
-----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and futures contracts (105,157,212) (605,224,882)
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and futures
contracts 519,286,935 (87,627,440)
===============================================================================================
Net increase (decrease) in net assets resulting from
operations 400,028,239 (719,033,721)
===============================================================================================
Share transactions-net:
Class A (162,460,380) (325,975,435)
-----------------------------------------------------------------------------------------------
Class B (136,334,779) (303,773,409)
-----------------------------------------------------------------------------------------------
Class C (51,018,964) (109,471,968)
-----------------------------------------------------------------------------------------------
Class R 1,425,250 36,356
-----------------------------------------------------------------------------------------------
Investor Class 99,068 --
-----------------------------------------------------------------------------------------------
Institutional Class (43,881) 168,155
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (348,333,686) (739,016,301)
===============================================================================================
Net increase (decrease) in net assets 51,694,553 (1,458,050,022)
===============================================================================================
NET ASSETS:
Beginning of year 2,903,854,053 4,361,904,075
===============================================================================================
End of year (including undistributed net investment income
(loss) of ($193,930) and ($154,369) for 2003 and 2002,
respectively) $2,955,548,606 $ 2,903,854,053
_______________________________________________________________________________________________
===============================================================================================
|
FS-21
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Blue Chip Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 primary investment objective is long-term growth of capital with a secondary objective of current income. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- 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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are
FS-22
translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the 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. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. 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.
G. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks also include to varying degrees, the risk of loss in excess of the variation margin.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first $350 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $350 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $21,702.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $540,113 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $6,046,387 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R, the Institutional Class and the Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C, Class R and the Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of the Investor Class shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C, Class R and the Investor Class shares paid $4,741,551, $11,597,496, $2,827,049, $2,613 and $10, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $345,660 in front-end sales commissions from the sale of Class A shares and $27,553, $3,029, $17,172 and $0 from
FS-23
Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $48,392 and reductions in custodian fees of $1,952 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $50,344.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $6,755 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $431,970 were on loan to brokers. The loans were secured by cash collateral of $447,700 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $34,455 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002.
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Unrealized appreciation -- investments $ 557,955,231 ------------------------------------------------------------ Temporary book/tax differences (193,930) ------------------------------------------------------------ Capital loss carryforward (1,776,622,010) ------------------------------------------------------------ Shares of beneficial interest 4,174,409,315 ============================================================ Total net assets $ 2,955,548,606 ____________________________________________________________ ============================================================ |
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's
FS-24
unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------------------------------------------------------
October 31, 2007 $ 38,614,682
------------------------------------------------------------
October 31, 2008 185,511,022
------------------------------------------------------------
October 31, 2009 833,974,843
------------------------------------------------------------
October 31, 2010 615,639,140
------------------------------------------------------------
October 31, 2011 102,882,323
============================================================
Total capital loss carryforward $1,776,622,010
____________________________________________________________
============================================================
|
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $752,061,350 and $1,056,490,615, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $611,034,149
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (53,078,918)
===========================================================
Net unrealized appreciation of investment
securities $557,955,231
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $2,381,912,431.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency transactions and net operating losses, on October 31, 2003, undistributed net investment income was increased by $14,061,923, undistributed net realized gains decreased by $1,362 and shares of beneficial interest decreased by $14,060,561. This reclassification had no effect on net assets of the Fund.
FS-25
NOTE 10--SHARE INFORMATION
The Fund currently consists of six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, the Institutional Class shares and the Investor Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares, the Institutional Class shares and the Investor Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2003 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 30,092,109 $ 289,868,346 35,714,782 $ 388,117,102
--------------------------------------------------------------------------------------------------------------------------
Class B 12,053,281 111,049,162 15,784,454 168,633,848
--------------------------------------------------------------------------------------------------------------------------
Class C 4,161,204 38,212,257 5,922,957 63,436,977
--------------------------------------------------------------------------------------------------------------------------
Class R* 164,023 1,619,420 3,975 36,381
--------------------------------------------------------------------------------------------------------------------------
Investor Class** 12,285 130,138 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class*** -- -- 19,795 192,879
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,670,042 16,099,491 1,132,609 12,298,772
--------------------------------------------------------------------------------------------------------------------------
Class B (1,741,215) (16,099,491) (1,170,222) (12,298,772)
==========================================================================================================================
Reacquired:
Class A (49,132,867) (468,428,217) (68,970,741) (726,391,309)
--------------------------------------------------------------------------------------------------------------------------
Class B (25,556,829) (231,284,450) (45,721,299) (460,108,485)
--------------------------------------------------------------------------------------------------------------------------
Class C (9,824,798) (89,231,221) (16,701,794) (172,908,945)
--------------------------------------------------------------------------------------------------------------------------
Class R* (20,044) (194,170) (3) (25)
--------------------------------------------------------------------------------------------------------------------------
Investor Class** (2,907) (31,070) -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class*** (4,720) (43,881) (2,515) (24,724)
==========================================================================================================================
(38,130,436) $(348,333,686) (73,988,002) $(739,016,301)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Investor Class shares commenced sales on September 30, 2003. *** Institutional Class shares commenced sales on March 15, 2002.
FS-26
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A(a)
-----------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.22 $ 11.22 $ 17.29 $ 15.49 $ 12.05
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.04)(b) (0.04) (0.05)(b) 0.01
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.49 (1.96) (6.03) 1.85 3.47
=================================================================================================================================
Total from investment operations 1.47 (2.00) (6.07) 1.80 3.48
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.01)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- -- -- (0.03)
=================================================================================================================================
Total distributions -- -- -- -- (0.04)
=================================================================================================================================
Net asset value, end of period $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 15.94% (17.82)% (35.11)% 11.60% 29.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,439,518 $1,402,589 $2,067,602 $3,163,453 $2,299,551
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.47%(d) 1.40% 1.28% 1.19% 1.19%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (0.17)%(d) (0.33)% (0.29)% (0.31)% 0.03%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 28% 28% 31% 22% 22%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Per share information for all periods prior to October 31, 2000 has been
restated to reflect a 3 for 1 stock split, effected in the form of a
200% stock dividend, on September 8, 2000.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $1,354,728,865.
CLASS B(a)
-----------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.88 $ 10.87 $ 16.87 $ 15.22 $ 11.91
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.10)(b) (0.13) (0.17)(b) (0.10)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.42 (1.89) (5.87) 1.82 3.44
=================================================================================================================================
Total from investment operations 1.34 (1.99) (6.00) 1.65 3.34
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (0.03)
=================================================================================================================================
Net asset value, end of period $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 15.09% (18.31)% (35.57)% 10.87% 28.08%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,223,821 $1,198,513 $1,806,464 $2,746,149 $1,891,171
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 2.12%(d) 2.05% 1.94% 1.88% 1.91%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (0.82)%(d) (0.98)% (0.94)% (1.00)% (0.68)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 28% 28% 31% 22% 22%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Per share information for all periods prior to October 31, 2000 has been
restated to reflect a 3 for 1 stock split, effected in the form of a
200% stock dividend, on September 8, 2000.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $1,159,749,563.
FS-27
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C(a)
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.88 $ 10.87 $ 16.86 $ 15.21 $ 11.91
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.10)(b) (0.13) (0.17)(b) (0.10)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.42 (1.89) (5.86) 1.82 3.43
=========================================================================================================================
Total from investment operations 1.34 (1.99) (5.99) 1.65 3.33
=========================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.03)
=========================================================================================================================
Net asset value, end of period $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 15.09% (18.31)% (35.53)% 10.82% 28.09%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $290,396 $302,555 $487,838 $720,186 $349,951
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 2.12%(d) 2.05% 1.94% 1.88% 1.90%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(d) (0.98)% (0.94)% (1.00)% (0.68)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 28% 28% 31% 22% 22%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Per share information for all periods prior to October 31, 2000 have
been restated to reflect a 3 for 1 stock split, effected in the form of
a 200% stock dividend, on September 8, 2000.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $282,704,852.
CLASS R
----------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.22 $ 10.53
------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00) (0.02)(a)
------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.44 (1.29)
==========================================================================================
Total from investment operations 1.44 (1.31)
==========================================================================================
Net asset value, end of period $10.66 $ 9.22
__________________________________________________________________________________________
==========================================================================================
Total return(b) 15.62% (12.44)%
__________________________________________________________________________________________
==========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,578 $ 37
__________________________________________________________________________________________
==========================================================================================
Ratio of expenses to average net assets 1.62%(c) 1.55%(d)
==========================================================================================
Ratio of net investment income (loss) to average net assets (0.32)%(c) (0.49)%(d)
__________________________________________________________________________________________
==========================================================================================
Portfolio turnover rate(e) 28% 28%
__________________________________________________________________________________________
==========================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $522,665.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-28
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
------------------
SEPTEMBER 30, 2003
(DATE SALES
COMMENCED)
TO OCTOBER 31,
2003
----------------------------------------------------------------------------------
Net asset value, beginning of period $10.16
----------------------------------------------------------------------------------
Income from investment operations:
Net Investment income (loss) (0.00)
----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.53
==================================================================================
Total from investment operations 0.53
==================================================================================
Net asset value, end of period $10.69
__________________________________________________________________________________
==================================================================================
Total return(a) 5.22%
__________________________________________________________________________________
==================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 100
__________________________________________________________________________________
==================================================================================
Ratio of expenses to average net assets 1.29%(b)
==================================================================================
Ratio of net investment income (loss) to average net assets (0.01)%(b)
__________________________________________________________________________________
==================================================================================
Portfolio turnover rate(c) 28%
__________________________________________________________________________________
==================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $49,231.
(c) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
--------------------------------
MARCH 15, 2002
(DATE SALES
YEAR ENDED COMMENCED)
OCTOBER 31, TO OCTOBER 31,
2003 2002
----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.26 $ 12.13
----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.02(a)
----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.49 (2.89)
==============================================================================================
Total from investment operations 1.55 (2.87)
==============================================================================================
Net asset value, end of period $10.81 $ 9.26
______________________________________________________________________________________________
==============================================================================================
Total return(b) 16.74% (23.66)%
______________________________________________________________________________________________
==============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 136 $ 160
______________________________________________________________________________________________
==============================================================================================
Ratio of expenses to average net assets 0.77%(c) 0.77%(d)
==============================================================================================
Ratio of net investment income to average net assets 0.53%(c) 0.30%(d)
______________________________________________________________________________________________
==============================================================================================
Portfolio turnover rate(e) 28% 28%
______________________________________________________________________________________________
==============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $141,917.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-29
NOTE 12--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-30
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Capital Development Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Capital Development Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Capital Development Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States.
Houston, Texas -s- Ernst & Young LLP December 16, 2003
FS-31
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.74%
ADVERTISING-1.14%
Interpublic Group of Cos., Inc. (The)(a) 498,200 $ 7,413,216
--------------------------------------------------------------------------
Lamar Advertising Co.(a) 136,000 4,120,800
==========================================================================
11,534,016
==========================================================================
AIR FREIGHT & LOGISTICS-1.07%
C.H. Robinson Worldwide, Inc. 274,900 10,770,582
==========================================================================
APPAREL RETAIL-1.50%
Limited Brands 288,000 5,068,800
--------------------------------------------------------------------------
Ross Stores, Inc. 201,200 10,062,012
==========================================================================
15,130,812
==========================================================================
APPLICATION SOFTWARE-4.41%
Amdocs Ltd. (United Kingdom)(a) 365,400 7,841,484
--------------------------------------------------------------------------
Autodesk, Inc. 578,100 11,128,425
--------------------------------------------------------------------------
Hyperion Solutions Corp.(a) 280,500 9,393,945
--------------------------------------------------------------------------
Intuit Inc.(a) 191,800 9,586,164
--------------------------------------------------------------------------
Siebel Systems, Inc.(a) 514,600 6,478,814
==========================================================================
44,428,832
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.93%
Affiliated Managers Group, Inc.(a) 141,000 10,222,500
--------------------------------------------------------------------------
American Capital Strategies, Ltd. 342,400 9,244,800
==========================================================================
19,467,300
==========================================================================
BIOTECHNOLOGY-0.47%
QLT Inc. (Canada)(a) 304,200 4,699,890
==========================================================================
BROADCASTING & CABLE TV-0.86%
Cox Radio, Inc.-Class A(a) 300,000 6,636,000
--------------------------------------------------------------------------
Westwood One, Inc.(a) 67,200 2,011,296
==========================================================================
8,647,296
==========================================================================
BUILDING PRODUCTS-1.23%
American Standard Cos. Inc.(a) 129,600 12,402,720
==========================================================================
CASINOS & GAMING-2.10%
GTECH Holdings Corp. 245,300 10,960,004
--------------------------------------------------------------------------
Harrah's Entertainment, Inc. 234,400 10,196,400
==========================================================================
21,156,404
==========================================================================
COMMUNICATIONS EQUIPMENT-2.32%
Avocent Corp.(a) 154,400 5,836,320
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Harris Corp. 284,900 $ 10,603,978
--------------------------------------------------------------------------
UTStarcom, Inc.(a) 219,900 6,926,850
==========================================================================
23,367,148
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.50%
Hutchinson Technology Inc.(a) 160,000 5,361,600
--------------------------------------------------------------------------
Imation Corp. 285,000 9,704,250
==========================================================================
15,065,850
==========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.08%
Cummins Inc. 117,100 5,550,540
--------------------------------------------------------------------------
Navistar International Corp.(a) 130,900 5,292,287
==========================================================================
10,842,827
==========================================================================
CONSUMER FINANCE-1.76%
AmeriCredit Corp.(a) 602,000 8,066,800
--------------------------------------------------------------------------
Capital One Financial Corp. 159,000 9,667,200
==========================================================================
17,734,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.63%
Alliance Data Systems Corp.(a) 354,200 9,839,676
--------------------------------------------------------------------------
Certegy Inc. 200,450 6,747,147
--------------------------------------------------------------------------
DST Systems, Inc.(a) 262,900 9,942,878
--------------------------------------------------------------------------
Fiserv, Inc.(a) 143,400 5,064,888
--------------------------------------------------------------------------
Iron Mountain Inc.(a) 131,100 5,013,264
==========================================================================
36,607,853
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.13%
ARAMARK Corp.-Class B(a) 398,700 10,653,264
--------------------------------------------------------------------------
Career Education Corp.(a) 108,400 5,804,820
--------------------------------------------------------------------------
United Rentals, Inc.(a) 286,500 4,990,830
==========================================================================
21,448,914
==========================================================================
DIVERSIFIED METALS & MINING-1.06%
CONSOL Energy Inc. (Acquired 9/17/03; Cost
$9,740,412)(a)(b)(c) 546,600 10,650,501
==========================================================================
ELECTRIC UTILITIES-1.10%
Wisconsin Energy Corp. 337,500 11,053,125
==========================================================================
|
FS-32
MARKET
SHARES VALUE
--------------------------------------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT-2.22%
Cooper Industries, Ltd.-Class A (Bermuda) 214,000 $ 11,320,600
--------------------------------------------------------------------------
Rockwell Automation, Inc. 354,600 11,010,330
==========================================================================
22,330,930
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-3.20%
Amphenol Corp.-Class A(a) 187,600 11,021,500
--------------------------------------------------------------------------
Varian Inc.(a) 282,800 10,127,068
--------------------------------------------------------------------------
Waters Corp.(a) 353,400 11,107,362
==========================================================================
32,255,930
==========================================================================
ENVIRONMENTAL SERVICES-1.00%
Republic Services, Inc. 435,000 10,113,750
==========================================================================
FOOTWEAR-1.12%
Reebok International Ltd. 290,800 11,326,660
==========================================================================
FOREST PRODUCTS-1.06%
Louisiana-Pacific Corp.(a) 561,200 10,674,024
==========================================================================
GAS UTILITIES-1.09%
Kinder Morgan, Inc. 205,800 11,020,590
==========================================================================
GENERAL MERCHANDISE STORES-1.49%
Dollar General Corp. 232,100 5,215,287
--------------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 255,500 9,754,990
==========================================================================
14,970,277
==========================================================================
HEALTH CARE DISTRIBUTORS-1.61%
Omnicare, Inc. 424,100 16,259,994
==========================================================================
HEALTH CARE EQUIPMENT-2.71%
Bard (C.R.), Inc. 153,800 12,311,690
--------------------------------------------------------------------------
Hillenbrand Industries, Inc. 177,600 10,572,528
--------------------------------------------------------------------------
STERIS Corp.(a) 210,000 4,372,200
==========================================================================
27,256,418
==========================================================================
HEALTH CARE FACILITIES-0.47%
Universal Health Services, Inc.-Class B(a) 100,000 4,705,000
==========================================================================
HEALTH CARE SERVICES-3.27%
AdvancePCS(a) 74,200 3,819,074
--------------------------------------------------------------------------
Caremark Rx, Inc.(a) 490,900 12,297,045
--------------------------------------------------------------------------
DaVita, Inc.(a) 308,600 10,831,860
--------------------------------------------------------------------------
Lincare Holdings Inc.(a) 153,100 5,961,714
==========================================================================
32,909,693
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HEALTH CARE SUPPLIES-1.16%
Fisher Scientific International Inc.(a) 290,000 $ 11,672,500
==========================================================================
HOMEBUILDING-0.63%
Lennar Corp.-Class A 69,100 6,346,835
==========================================================================
HOTELS, RESORTS & CRUISE LINES-0.38%
Starwood Hotels & Resorts Worldwide, Inc. 113,800 3,838,474
==========================================================================
HOUSEWARES & SPECIALTIES-1.13%
Yankee Candle Co., Inc. (The)(a) 408,400 11,427,032
==========================================================================
INDUSTRIAL GASES-0.86%
Airgas, Inc. 455,000 8,713,250
==========================================================================
INDUSTRIAL MACHINERY-2.06%
Parker-Hannifin Corp. 194,400 9,908,568
--------------------------------------------------------------------------
SPX Corp.(a) 225,900 10,870,308
==========================================================================
20,778,876
==========================================================================
INTEGRATED OIL & GAS-0.76%
Murphy Oil Corp. 129,500 7,637,910
==========================================================================
INTERNET SOFTWARE & SERVICES-0.52%
United Online, Inc.(a) 182,200 5,245,538
==========================================================================
INVESTMENT COMPANIES-ETFS-0.26%
iShares Nasdaq Biotechnology Index Fund(a) 36,400 2,584,036
==========================================================================
LEISURE PRODUCTS-2.28%
Brunswick Corp. 386,100 11,455,587
--------------------------------------------------------------------------
Hasbro, Inc. 530,300 11,560,540
==========================================================================
23,016,127
==========================================================================
MANAGED HEALTH CARE-1.23%
Anthem, Inc.(a) 73,000 4,995,390
--------------------------------------------------------------------------
Coventry Health Care, Inc.(a) 135,200 7,402,200
==========================================================================
12,397,590
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.13%
Williams Cos., Inc. (The) 1,120,100 11,425,020
==========================================================================
OFFICE ELECTRONICS-0.91%
Zebra Technologies Corp.-Class A(a) 161,150 9,177,493
==========================================================================
OIL & GAS DRILLING-1.19%
Pride International, Inc.(a) 447,300 7,326,774
--------------------------------------------------------------------------
Rowan Cos., Inc.(a) 194,300 4,653,485
==========================================================================
11,980,259
==========================================================================
|
FS-33
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-0.83%
BJ Services Co.(a) 111,300 $ 3,651,753
--------------------------------------------------------------------------
Key Energy Services, Inc.(a) 539,500 4,709,835
==========================================================================
8,361,588
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.83%
XTO Energy, Inc. 351,300 8,315,271
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.30%
CapitalSource Inc.(a) 137,700 2,994,975
==========================================================================
PACKAGED FOODS & MEATS-0.54%
Flowers Foods, Inc. 228,400 5,419,932
==========================================================================
PAPER PACKAGING-2.08%
Sealed Air Corp.(a) 202,200 10,763,106
--------------------------------------------------------------------------
Smurfit-Stone Container Corp.(a) 659,100 10,216,050
==========================================================================
20,979,156
==========================================================================
PERSONAL PRODUCTS-1.04%
NBTY, Inc.(a) 385,600 10,507,600
==========================================================================
PHARMACEUTICALS-3.14%
Medicis Pharmaceutical Corp.-Class A 97,600 6,182,960
--------------------------------------------------------------------------
Mylan Laboratories Inc. 215,100 5,194,665
--------------------------------------------------------------------------
Pharmaceutical Resources, Inc.(a) 149,500 10,805,860
--------------------------------------------------------------------------
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom)(a) 413,547 9,470,226
==========================================================================
31,653,711
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.97%
ACE Ltd. (Cayman Islands) 270,617 9,742,212
--------------------------------------------------------------------------
Quanta Capital Holdings Ltd. (Bermuda)
(Acquired 08/27/03; Cost $10,000,000)(a)(b) 1,000,000 10,100,000
==========================================================================
19,842,212
==========================================================================
PUBLISHING-0.33%
Journal Communications, Inc.-Class A(a) 189,700 3,374,763
==========================================================================
REAL ESTATE-2.63%
American Financial Realty Trust(c) 840,100 12,769,520
--------------------------------------------------------------------------
Friedman, Billings, Ramsey Group, Inc.-Class
A 689,155 13,727,968
==========================================================================
26,497,488
==========================================================================
REGIONAL BANKS-0.47%
Compass Bancshares, Inc. 125,100 4,726,278
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
REINSURANCE-2.45%
Everest Re Group, Ltd. (Bermuda) 120,800 $ 10,020,360
--------------------------------------------------------------------------
PartnerRe Ltd. (Bermuda) 91,500 4,965,705
--------------------------------------------------------------------------
Platinum Underwriters Holdings, Ltd.
(Bermuda) 337,200 9,691,128
==========================================================================
24,677,193
==========================================================================
RESTAURANTS-2.14%
Brinker International, Inc.(a) 305,600 9,727,248
--------------------------------------------------------------------------
Ruby Tuesday, Inc. 431,500 11,801,525
==========================================================================
21,528,773
==========================================================================
SEMICONDUCTOR EQUIPMENT-0.56%
Novellus Systems, Inc.(a) 136,700 5,644,343
==========================================================================
SEMICONDUCTORS-3.91%
Cypress Semiconductor Corp.(a) 252,000 5,407,920
--------------------------------------------------------------------------
GlobespanVirata, Inc.(a) 1,087,400 6,698,384
--------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 297,300 9,980,361
--------------------------------------------------------------------------
Intersil Corp.-Class A 276,300 7,125,777
--------------------------------------------------------------------------
Microchip Technology Inc. 311,162 10,178,109
==========================================================================
39,390,551
==========================================================================
SPECIALTY CHEMICALS-0.51%
Great Lakes Chemical Corp. 239,500 5,149,250
==========================================================================
SPECIALTY STORES-3.38%
Advance Auto Parts, Inc.(a) 167,600 13,109,672
--------------------------------------------------------------------------
Michaels Stores, Inc. 245,700 11,663,379
--------------------------------------------------------------------------
Rent-A-Center, Inc.(a) 297,500 9,299,850
==========================================================================
34,072,901
==========================================================================
TECHNOLOGY DISTRIBUTORS-1.01%
CDW Corp. 170,100 10,214,505
==========================================================================
THRIFTS & MORTGAGE FINANCE-5.59%
Doral Financial Corp. (Puerto Rico) 222,100 11,216,050
--------------------------------------------------------------------------
New Century Financial Corp. 153,100 5,676,948
--------------------------------------------------------------------------
New York Community Bancorp, Inc. 336,666 12,187,309
--------------------------------------------------------------------------
PMI Group, Inc. (The) 276,900 10,585,887
--------------------------------------------------------------------------
Radian Group Inc. 209,000 11,056,100
--------------------------------------------------------------------------
Saxon Capital Acquisition Corp.(a)(c) 296,600 5,582,012
==========================================================================
56,304,306
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $736,403,096) 974,727,072
==========================================================================
|
FS-34
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MONEY MARKET FUNDS-3.25%
STIC Liquid Assets Portfolio(d) 16,395,571 $ 16,395,571
--------------------------------------------------------------------------
STIC Prime Portfolio(d) 16,395,571 16,395,571
==========================================================================
Total Money Market Funds (Cost
$32,791,142) 32,791,142
==========================================================================
TOTAL INVESTMENTS-99.99% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $769,194,238) 1,007,518,214
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-15.47%
STIC Liquid Assets Portfolio(d)(e) 77,943,886 $ 77,943,886
--------------------------------------------------------------------------
STIC Prime Portfolio(d)(e) 77,943,886 77,943,886
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $155,887,772) 155,887,772
==========================================================================
TOTAL INVESTMENTS-115.46% (Cost $925,082,010) 1,163,405,986
==========================================================================
OTHER ASSETS LESS LIABILITIES-(15.46%) (155,813,164)
==========================================================================
NET ASSETS-100.00% $1,007,592,822
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 10/31/03 was $20,750,501,
which represented 2.06% of the Fund's net assets. These securities are
considered to be illiquid.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-35
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$736,403,096)* $ 974,727,072
------------------------------------------------------------
Investments in affiliated money market funds
(cost $188,678,914) 188,678,914
------------------------------------------------------------
Receivables for:
Investments sold 14,296,403
------------------------------------------------------------
Fund shares sold 495,691
------------------------------------------------------------
Dividends 134,758
------------------------------------------------------------
Investment for deferred compensation plan 48,771
------------------------------------------------------------
Other assets 34,459
============================================================
Total assets 1,178,416,068
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 12,090,192
------------------------------------------------------------
Fund shares reacquired 1,282,728
------------------------------------------------------------
Deferred compensation plan 48,771
------------------------------------------------------------
Collateral upon return of securities
loaned 155,887,772
------------------------------------------------------------
Accrued distribution fees 629,898
------------------------------------------------------------
Accrued trustees' fees 41,641
------------------------------------------------------------
Accrued transfer agent fees 675,452
------------------------------------------------------------
Accrued operating expenses 166,792
============================================================
Total liabilities 170,823,246
============================================================
Net assets applicable to shares outstanding $1,007,592,822
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 745,788,184
------------------------------------------------------------
Undistributed net investment income (loss) (85,597)
------------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and option contracts 23,566,260
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 238,323,975
============================================================
$1,007,592,822
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 545,691,273
____________________________________________________________
============================================================
Class B $ 392,381,668
____________________________________________________________
============================================================
Class C $ 68,356,008
____________________________________________________________
============================================================
Class R $ 1,154,117
____________________________________________________________
============================================================
Institutional Class $ 9,756
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 32,748,997
____________________________________________________________
============================================================
Class B 24,853,019
____________________________________________________________
============================================================
Class C 4,332,614
____________________________________________________________
============================================================
Class R 69,441
____________________________________________________________
============================================================
Institutional Class 580
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 16.66
------------------------------------------------------------
Offering price per share:
(Net asset value of $16.66 divided by
94.50%) $ 17.63
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 15.79
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 15.78
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 16.62
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 16.83
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $153,631,096 were on loan to brokers.
See Notes to Financial Statements.
FS-36
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $8,183) $ 7,752,065
--------------------------------------------------------------------------
Dividends from affiliated money market funds 588,530
--------------------------------------------------------------------------
Securities lending 307,752
==========================================================================
Total investment income 8,648,347
==========================================================================
EXPENSES:
Advisory fees 6,014,863
--------------------------------------------------------------------------
Administrative services fees 240,864
--------------------------------------------------------------------------
Custodian fees 113,090
--------------------------------------------------------------------------
Distribution fees:
Class A 1,681,630
--------------------------------------------------------------------------
Class B 3,525,000
--------------------------------------------------------------------------
Class C 588,010
--------------------------------------------------------------------------
Class R 3,016
--------------------------------------------------------------------------
Transfer agent fees 3,582,073
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 39
--------------------------------------------------------------------------
Trustees' fees 24,521
--------------------------------------------------------------------------
Other 553,293
==========================================================================
Total expenses 16,326,399
==========================================================================
Less: Fees waived and expense offset arrangements (26,311)
==========================================================================
Net expenses 16,300,088
==========================================================================
Net investment income (loss) (7,651,741)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 64,257,050
--------------------------------------------------------------------------
Foreign currencies 62,002
--------------------------------------------------------------------------
Option contracts written 126,096
==========================================================================
64,445,148
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 180,428,278
--------------------------------------------------------------------------
Foreign currencies (902)
==========================================================================
180,427,376
==========================================================================
Net gain from investment securities, foreign currencies and
option contracts 244,872,524
==========================================================================
Net increase in net assets resulting from operations $237,220,783
__________________________________________________________________________
==========================================================================
|
See Notes to Financial Statements.
FS-37
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (7,651,741) $ (6,585,862)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 64,445,148 (27,642,639)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts 180,427,376 (101,615,274)
==============================================================================================
Net increase (decrease) in net assets resulting from
operations 237,220,783 (135,843,775)
==============================================================================================
Share transactions-net:
Class A (40,295,276) (49,872,882)
----------------------------------------------------------------------------------------------
Class B (45,852,897) (51,574,661)
----------------------------------------------------------------------------------------------
Class C (3,420,452) (497,034)
----------------------------------------------------------------------------------------------
Class R 902,244 12,300
----------------------------------------------------------------------------------------------
Institutional Class -- 10,000
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (88,666,381) (101,922,277)
==============================================================================================
Net increase (decrease) in net assets 148,554,402 (237,766,052)
==============================================================================================
NET ASSETS:
Beginning of year 859,038,420 1,096,804,472
==============================================================================================
End of year (including undistributed net investment income
(loss) of ($85,597) and ($70,846) for 2003 and 2002,
respectively) $1,007,592,822 $ 859,038,420
______________________________________________________________________________________________
==============================================================================================
|
See Notes to Financial Statements.
FS-38
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Capital Development Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADR's, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- 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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are
FS-39
translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the 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. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. 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.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first $350 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $350 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $11,378.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $240,864 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc. a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $1,793,309 for such services and reimbursed fees for the Institutional Class shares of $31.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $1,681,630, $3,525,000, $588,010 and $3,016, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to
FS-40
remittance to the shareholder. During year ended October 31, 2003, AIM Distributors retained $104,786 in front-end sales commissions from the sale of Class A shares and $3,521, $108, $4,404 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $13,767 and reductions in custodian fees of $1,135 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $14,902.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $3,650 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $153,631,096 were on loan to brokers. The loans were secured by cash collateral of $155,887,772 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2003, the Fund received fees of $307,752 for securities lending.
NOTE 7--OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 2003 are summarized as follows:
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------------------------------------------------
Beginning of year -- $ --
----------------------------------------------------------
Written 1,300 126,096
----------------------------------------------------------
Expired (1,300) (126,096)
==========================================================
End of year -- $ --
__________________________________________________________
==========================================================
|
FS-41
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002.
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Undistributed long-term gain $ 24,193,359 ------------------------------------------------------------ Unrealized appreciation -- investments 237,696,876 ------------------------------------------------------------ Temporary book/tax differences (85,597) ------------------------------------------------------------ Shares of beneficial interest 745,788,184 ============================================================ Total net assets $1,007,592,822 ____________________________________________________________ ============================================================ |
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales and deferral of losses on straddles.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $853,484,217 and $916,157,482, respectively.
UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $246,128,701
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (8,431,825)
===========================================================
Net unrealized appreciation of investment
securities $237,696,876
___________________________________________________________
===========================================================
Cost of investments for tax purposes is
$925,709,110.
|
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions, net operating losses and excise tax paid, on October 31, 2003, undistributed net investment income was increased by $7,636,990, undistributed net realized gains decreased by $62,002 and shares of beneficial interest decreased by $7,574,988. This reclassification had no effect on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2003 2002
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 7,864,878 $ 109,808,336 8,723,183 $ 137,031,183
---------------------------------------------------------------------------------------------------------------------------
Class B 2,057,426 27,535,873 3,358,008 50,474,614
---------------------------------------------------------------------------------------------------------------------------
Class C 834,828 11,240,012 1,443,905 21,757,217
---------------------------------------------------------------------------------------------------------------------------
Class R* 74,458 986,707 749 12,300
---------------------------------------------------------------------------------------------------------------------------
Institutional Class** -- -- 580 10,000
===========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 340,670 4,868,315 0 0
---------------------------------------------------------------------------------------------------------------------------
Class B (358,616) (4,868,315) 0 0
===========================================================================================================================
Reacquired:
Class A (11,106,766) (154,971,927) (12,317,285) (186,904,065)
---------------------------------------------------------------------------------------------------------------------------
Class B (5,230,794) (68,520,455) (7,163,019) (102,049,275)
---------------------------------------------------------------------------------------------------------------------------
Class C (1,117,790) (14,660,464) (1,519,831) (22,254,251)
---------------------------------------------------------------------------------------------------------------------------
Class R* (5,766) (84,463) -- --
===========================================================================================================================
(6,647,472) $ (88,666,381) (7,473,710) $(101,922,277)
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002.
FS-42
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.80 $ 14.69 $ 21.79 $ 15.24 $ 12.89
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.04)(a) (0.04) (0.13) (0.10)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.94 (1.85) (4.27) 6.68 2.45
=============================================================================================================================
Total from investment operations 3.86 (1.89) (4.31) 6.55 2.35
=============================================================================================================================
Less distributions from net realized gains -- -- (2.79) -- --
=============================================================================================================================
Net asset value, end of period $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 30.16% (12.87)% (21.76)% 42.98% 18.23%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $545,691 $456,268 $576,660 $759,838 $579,514
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets 1.53%(c) 1.38% 1.33% 1.28% 1.38%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.56)%(c) (0.29)% (0.21)% (0.60)% (0.70)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 101% 120% 130% 101% 117%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $480,465,624.
CLASS B
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.21 $ 14.10 $ 21.16 $ 14.90 $ 12.70
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.16)(a) (0.14)(a) (0.15) (0.26) (0.20)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.74 (1.75) (4.12) 6.52 2.40
=============================================================================================================================
Total from investment operations 3.58 (1.89) (4.27) 6.26 2.20
=============================================================================================================================
Less distributions from net realized gains -- -- (2.79) -- --
=============================================================================================================================
Net asset value, end of period $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 29.32% (13.40)% (22.29)% 42.01% 17.32%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $392,382 $346,456 $454,018 $617,576 $451,508
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets 2.18%(c) 2.03% 1.99% 1.99% 2.12%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.21)%(c) (0.94)% (0.87)% (1.30)% (1.44)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 101% 120% 130% 101% 117%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $352,500,019.
FS-43
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.20 $ 14.10 $ 21.15 $ 14.89 $ 12.69
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.16)(a) (0.14)(a) (0.14) (0.25) (0.20)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.74 (1.76) (4.12) 6.51 2.40
============================================================================================================================
Total from investment operations 3.58 (1.90) (4.26) 6.26 2.20
============================================================================================================================
Less distributions from net realized gains -- -- (2.79) -- --
============================================================================================================================
Net asset value, end of period $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 29.34% (13.48)% (22.24)% 42.04% 17.34%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $68,356 $56,298 $66,127 $82,982 $53,832
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 2.18%(c) 2.03% 1.99% 1.99% 2.12%
============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.21)%(c) (0.94)% (0.87)% (1.30)% (1.44)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 101% 120% 130% 101% 117%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $58,801,044.
CLASS R
-------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.79 $ 16.62
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.03)(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.93 (3.80)
=============================================================================================
Total from investment operations 3.83 (3.83)
=============================================================================================
Net asset value, end of period $16.62 $ 12.79
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 29.95% (23.05)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,154 $ 10
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 1.68%(c) 1.54%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (0.71)%(c) (0.44)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 101% 120%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $603,132.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-44
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL
--------------------------------
MARCH 15, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
----------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.84 $ 17.25
----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) 0.02(a)
----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.98 (4.43)
==============================================================================================
Total from investment operations 3.99 (4.41)
==============================================================================================
Net asset value, end of period $16.83 $ 12.84
______________________________________________________________________________________________
==============================================================================================
Total return(b) 31.08% (25.57)%
______________________________________________________________________________________________
==============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10 $ 7
______________________________________________________________________________________________
==============================================================================================
Ratio of expenses to average net assets
With fee waivers 0.87%(c) 0.84%(d)
----------------------------------------------------------------------------------------------
Without fee waivers 1.25%(c) 0.99%(d)
==============================================================================================
Ratio of net investment income to average net assets 0.10%(c) 0.25%(d)
______________________________________________________________________________________________
==============================================================================================
Portfolio turnover rate(e) 101% 120%
______________________________________________________________________________________________
==============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $8,217.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 13--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
FS-45
NOTE 13--SUBSEQUENT EVENTS (CONTINUED)
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-46
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Charter Fund
And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Charter Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Charter Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States.
Houston, Texas /s/ ERNST & YOUNG LLP December 16, 2003 |
FS-47
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
-------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-80.40%
ADVERTISING-1.10%
Omnicom Group Inc. 460,000 $ 36,708,000
=========================================================================
AEROSPACE & DEFENSE-2.19%
Lockheed Martin Corp. 492,200 22,818,392
-------------------------------------------------------------------------
Northrop Grumman Corp. 560,000 50,064,000
=========================================================================
72,882,392
=========================================================================
APPAREL RETAIL-1.78%
Limited Brands 3,355,000 59,048,000
=========================================================================
BUILDING PRODUCTS-2.26%
American Standard Cos. Inc.(a) 449,000 42,969,300
-------------------------------------------------------------------------
Masco Corp. 1,174,500 32,298,750
=========================================================================
75,268,050
=========================================================================
COMMUNICATIONS EQUIPMENT-0.76%
Cisco Systems, Inc.(a) 1,200,000 25,176,000
=========================================================================
COMPUTER HARDWARE-2.80%
Dell Inc.(a) 700,000 25,284,000
-------------------------------------------------------------------------
Hewlett-Packard Co. 1,000,000 22,310,000
-------------------------------------------------------------------------
International Business Machines Corp. 510,000 45,634,800
=========================================================================
93,228,800
=========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.54%
Automatic Data Processing, Inc. 1,355,000 51,137,700
=========================================================================
DIVERSIFIED BANKS-1.21%
Bank of America Corp. 530,000 40,136,900
=========================================================================
DIVERSIFIED CHEMICALS-0.96%
Dow Chemical Co. (The) 850,000 32,036,500
=========================================================================
ELECTRIC UTILITIES-1.41%
FPL Group, Inc. 430,000 27,408,200
-------------------------------------------------------------------------
TXU Corp. 850,000 19,397,000
=========================================================================
46,805,200
=========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.49%
Emerson Electric Co. 875,000 49,656,250
=========================================================================
ENVIRONMENTAL SERVICES-1.12%
Waste Management, Inc. 1,440,000 37,324,800
=========================================================================
FOOD RETAIL-2.78%
Kroger Co. (The)(a) 3,210,000 56,142,900
-------------------------------------------------------------------------
Safeway Inc.(a) 1,720,000 36,292,000
=========================================================================
92,434,900
=========================================================================
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
FOOTWEAR-1.38%
NIKE, Inc.-Class B 719,500 $ 45,976,050
=========================================================================
HOME IMPROVEMENT RETAIL-1.38%
Home Depot, Inc. (The) 1,235,000 45,781,450
=========================================================================
HOUSEHOLD PRODUCTS-1.08%
Kimberly-Clark Corp. 680,000 35,910,800
=========================================================================
HOUSEWARES & SPECIALTIES-1.19%
Newell Rubbermaid Inc. 1,740,000 39,672,000
=========================================================================
HYPERMARKETS & SUPER CENTERS-0.89%
Wal-Mart Stores, Inc. 500,000 29,475,000
=========================================================================
INDUSTRIAL MACHINERY-3.50%
Dover Corp. 1,690,000 65,943,800
-------------------------------------------------------------------------
Illinois Tool Works Inc. 685,000 50,381,750
=========================================================================
116,325,550
=========================================================================
INTEGRATED OIL & GAS-4.67%
ChevronTexaco Corp. 520,000 38,636,000
-------------------------------------------------------------------------
ConocoPhillips 610,000 34,861,500
-------------------------------------------------------------------------
Exxon Mobil Corp. 1,225,000 44,810,500
-------------------------------------------------------------------------
Occidental Petroleum Corp. 1,050,000 37,023,000
=========================================================================
155,331,000
=========================================================================
INVESTMENT BANKING & BROKERAGE-1.37%
Morgan Stanley 830,000 45,542,100
=========================================================================
LIFE & HEALTH INSURANCE-1.38%
Prudential Financial, Inc. 1,190,000 45,981,600
=========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.02%
Baker Hughes Inc. 1,200,000 33,912,000
=========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.07%
Citigroup Inc. 1,350,000 63,990,000
-------------------------------------------------------------------------
Principal Financial Group, Inc. 1,215,000 38,090,250
=========================================================================
102,080,250
=========================================================================
PACKAGED FOODS & MEATS-9.83%
Campbell Soup Co. 2,020,000 52,358,400
-------------------------------------------------------------------------
ConAgra Foods, Inc. 1,330,300 31,714,352
-------------------------------------------------------------------------
|
FS-48
MARKET
SHARES VALUE
-------------------------------------------------------------------------
PACKAGED FOODS & MEATS-(CONTINUED)
General Mills, Inc. 1,600,000 $ 71,760,000
-------------------------------------------------------------------------
Kellogg Co. 1,930,000 63,940,900
-------------------------------------------------------------------------
Kraft Foods Inc.-Class A 1,600,000 46,560,000
-------------------------------------------------------------------------
Sara Lee Corp. 3,045,000 60,686,850
=========================================================================
327,020,502
=========================================================================
PERSONAL PRODUCTS-1.07%
Gillette Co. (The) 1,120,000 35,728,000
=========================================================================
PHARMACEUTICALS-8.27%
Abbott Laboratories 790,000 33,669,800
-------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,450,000 36,786,500
-------------------------------------------------------------------------
Johnson & Johnson 935,000 47,058,550
-------------------------------------------------------------------------
Merck & Co. Inc. 740,000 32,745,000
-------------------------------------------------------------------------
Pfizer Inc. 2,170,000 68,572,000
-------------------------------------------------------------------------
Wyeth 1,270,000 56,057,800
=========================================================================
274,889,650
=========================================================================
PROPERTY & CASUALTY INSURANCE-0.94%
Travelers Property Casualty Corp.-Class A 856,486 13,960,722
-------------------------------------------------------------------------
Travelers Property Casualty Corp.-Class B 1,054,271 17,258,416
=========================================================================
31,219,138
=========================================================================
PUBLISHING-2.24%
Gannett Co., Inc. 450,000 37,849,500
-------------------------------------------------------------------------
New York Times Co. (The)-Class A 772,900 36,735,937
=========================================================================
74,585,437
=========================================================================
RAILROADS-1.73%
Norfolk Southern Corp. 1,334,000 26,880,100
-------------------------------------------------------------------------
Union Pacific Corp. 490,000 30,674,000
=========================================================================
57,554,100
=========================================================================
RESTAURANTS-1.40%
McDonald's Corp. 1,855,000 46,393,550
=========================================================================
SEMICONDUCTOR EQUIPMENT-1.24%
KLA-Tencor Corp.(a) 720,000 41,277,600
=========================================================================
SEMICONDUCTORS-3.53%
Intel Corp. 1,959,500 64,761,475
-------------------------------------------------------------------------
Xilinx, Inc.(a) 1,665,000 52,780,500
=========================================================================
117,541,975
=========================================================================
SOFT DRINKS-1.09%
Coca-Cola Co. (The) 780,000 36,192,000
=========================================================================
SYSTEMS SOFTWARE-4.84%
Computer Associates International, Inc. 3,310,000 77,851,200
-------------------------------------------------------------------------
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
SYSTEMS SOFTWARE-(CONTINUED)
Microsoft Corp. 2,287,000 $ 59,805,050
-------------------------------------------------------------------------
Oracle Corp.(a) 1,960,000 23,441,600
=========================================================================
161,097,850
=========================================================================
THRIFTS & MORTGAGE FINANCE-1.89%
Washington Mutual, Inc. 1,440,000 63,000,000
=========================================================================
Total Domestic Common Stocks (Cost
$2,418,180,502) 2,674,331,094
=========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-11.50%
BERMUDA-1.97%
Tyco International Ltd. (Industrial
Conglomerates) 2,000,000 41,760,000
-------------------------------------------------------------------------
XL Capital Ltd.-Class A (Property & Casualty
Insurance) 340,000 23,630,000
=========================================================================
65,390,000
=========================================================================
CAYMAN ISLANDS-2.12%
ACE Ltd. (Property & Casualty Insurance) 1,025,000 36,900,000
-------------------------------------------------------------------------
GlobalSantaFe Corp. (Oil & Gas Drilling) 1,500,000 33,765,000
=========================================================================
70,665,000
=========================================================================
GERMANY-0.78%
SAP A.G.-ADR (Application Software) 712,000 26,016,480
=========================================================================
ISRAEL-1.61%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 940,000 53,476,600
=========================================================================
PANAMA-1.29%
Carnival Corp. (Hotels, Resorts & Cruise
Lines) 1,225,000 42,764,750
=========================================================================
SWITZERLAND-1.90%
Alcon, Inc. (Health Care Supplies) 1,150,000 63,376,500
=========================================================================
TAIWAN-0.81%
Taiwan Semiconductor Manufacturing Co. Ltd.-
ADR (Semiconductors) 2,447,280 27,066,917
=========================================================================
UNITED KINGDOM-1.02%
BP PLC-ADR (Integrated Oil & Gas) 800,000 33,904,000
=========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $323,738,450) 382,660,247
=========================================================================
MONEY MARKET FUNDS-5.95%
STIC Liquid Assets Portfolio(b) 98,974,452 98,974,452
-------------------------------------------------------------------------
STIC Prime Portfolio(b) 98,974,452 98,974,452
=========================================================================
Total Money Market Funds (Cost
$197,948,904) 197,948,904
=========================================================================
TOTAL INVESTMENTS-97.85% (excluding
investments purchased with cash collateral
from securities loaned)(Cost
$2,939,867,856) 3,254,940,245
=========================================================================
|
FS-49
MARKET
SHARES VALUE
-------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.68%
STIC Liquid Assets Portfolio(b)(c) 22,552,000 $ 22,552,000
=========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $22,552,000) 22,552,000
=========================================================================
TOTAL INVESTMENTS--98.53% (Cost
$2,962,419,856) 3,277,492,245
=========================================================================
OTHER ASSETS LESS LIABILITIES--1.47% 48,786,899
=========================================================================
NET ASSETS--100.00% $3,326,279,144
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-50
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$2,741,918,952)* $3,056,991,341
------------------------------------------------------------
Investments in affiliated money market funds
(cost $220,500,904) 220,500,904
------------------------------------------------------------
Cash 74,415
------------------------------------------------------------
Receivables for:
Investments sold 75,751,738
------------------------------------------------------------
Fund shares sold 880,244
------------------------------------------------------------
Dividends 4,368,336
------------------------------------------------------------
Investments matured (Note 8) 607,000
------------------------------------------------------------
Investment for deferred compensation plan 152,900
------------------------------------------------------------
Other assets 84,262
============================================================
Total assets 3,359,411,140
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 6,530,307
------------------------------------------------------------
Deferred compensation plan 152,900
------------------------------------------------------------
Collateral upon return of securities
loaned 22,552,000
------------------------------------------------------------
Accrued distribution fees 1,679,277
------------------------------------------------------------
Accrued trustees' fees 216,869
------------------------------------------------------------
Accrued transfer agent fees 1,617,006
------------------------------------------------------------
Accrued operating expenses 383,637
============================================================
Total liabilities 33,131,996
============================================================
Net assets applicable to shares outstanding $3,326,279,144
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,962,274,000
------------------------------------------------------------
Undistributed net investment income 1,365,253
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (952,432,498)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 315,072,389
============================================================
$3,326,279,144
____________________________________________________________
============================================================
NET ASSETS:
Class A $2,008,702,269
____________________________________________________________
============================================================
Class B $1,149,942,947
____________________________________________________________
============================================================
Class C $ 163,859,364
____________________________________________________________
============================================================
Class R $ 1,713,858
____________________________________________________________
============================================================
Institutional Class $ 2,060,706
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED
NUMBER OF SHARES AUTHORIZED:
Class A 180,585,240
____________________________________________________________
============================================================
Class B 107,811,471
____________________________________________________________
============================================================
Class C 15,319,076
____________________________________________________________
============================================================
Class R 154,647
____________________________________________________________
============================================================
Institutional Class 179,936
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 11.12
------------------------------------------------------------
Offering price per share:
(Net asset value of $11.12 divided by
94.50%) $ 11.77
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.67
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.70
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 11.08
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 11.45
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $21,709,590
were on loan to brokers.
See Notes to Financial Statements.
FS-51
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $301,430) $ 51,649,180
---------------------------------------------------------------------------
Dividends from affiliated money market funds 3,818,102
---------------------------------------------------------------------------
Securities lending 220,475
===========================================================================
Total investment income 55,687,757
===========================================================================
EXPENSES:
Advisory fees 20,917,533
---------------------------------------------------------------------------
Administrative services fees 574,103
---------------------------------------------------------------------------
Custodian fees 243,985
---------------------------------------------------------------------------
Distribution fees:
Class A 5,969,787
---------------------------------------------------------------------------
Class B 11,503,103
---------------------------------------------------------------------------
Class C 1,621,567
---------------------------------------------------------------------------
Class R 3,783
---------------------------------------------------------------------------
Transfer agent fees 10,331,020
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,555
---------------------------------------------------------------------------
Trustees' fees 68,932
---------------------------------------------------------------------------
Other 1,080,550
===========================================================================
Total expenses 52,315,918
===========================================================================
Less: Fees waived and expense offset arrangements (124,977)
===========================================================================
Net expenses 52,190,941
===========================================================================
Net investment income 3,496,816
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from investment securities (177,091,373)
---------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 649,910,066
---------------------------------------------------------------------------
Foreign currencies (67)
===========================================================================
649,909,999
===========================================================================
Net gain from investment securities and foreign currencies 472,818,626
===========================================================================
Net increase in net assets resulting from operations $ 476,315,442
___________________________________________________________________________
===========================================================================
|
See Notes to Financial Statements.
FS-52
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
-----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 3,496,816 $ (8,504,860)
-----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (177,091,373) 304,583,841
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 649,909,999 (628,211,415)
===============================================================================================
Net increase (decrease) in net assets resulting from
operations 476,315,442 (332,132,434)
===============================================================================================
Share transactions-net:
Class A (380,938,708) (870,998,051)
-----------------------------------------------------------------------------------------------
Class B (215,082,650) (391,079,522)
-----------------------------------------------------------------------------------------------
Class C (29,277,194) (61,301,813)
-----------------------------------------------------------------------------------------------
Class R 1,521,693 17,606
-----------------------------------------------------------------------------------------------
Institutional Class 339,875 (60,090)
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (623,436,984) (1,323,421,870)
===============================================================================================
Net increase (decrease) in net assets (147,121,542) (1,655,554,304)
===============================================================================================
NET ASSETS:
Beginning of year 3,473,400,686 5,128,954,990
===============================================================================================
End of year (including undistributed net investment income
(loss) of $1,365,253 and $(2,131,563) for 2003 and 2002,
respectively) $3,326,279,144 $ 3,473,400,686
_______________________________________________________________________________________________
===============================================================================================
|
See Notes to Financial Statements.
FS-53
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- 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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-54
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the 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. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. 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.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the first $30 million of the Fund's average daily net assets, plus 0.75% of the Fund's average daily net assets in excess of $30 million up to and including $150 million, plus 0.625% of the Fund's average daily net assets in excess of $150 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $71,387. Under the terms of a master sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $574,103 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $5,291,312 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $5,969,787, $11,503,103, $1,621,567 and $3,783, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $266,509 in front-end sales commissions from the sale of Class A shares and $3,192, $1,449, $10,762 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $52,204 and reductions in custodian fees of $1,386 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $53,590.
FS-55
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $7,667 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $21,709,590 were on loan to brokers. The loans were secured by cash collateral of $22,552,000 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $220,475 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002.
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Undistributed ordinary income $ 4,232,634 ------------------------------------------------------------ Unrealized appreciation -- investments 263,538,600 ------------------------------------------------------------ Temporary book/tax differences (366,068) ------------------------------------------------------------ Capital loss carryforward (903,400,022) ------------------------------------------------------------ Shares of beneficial interest 3,962,274,000 ============================================================ Total net assets $3,326,279,144 ____________________________________________________________ ============================================================ |
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales and the treatment of defaulted bonds.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses.
FS-56
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
--------------------------------------------------------------------------
October 31, 2009 $771,331,122
--------------------------------------------------------------------------
October 31, 2011 132,068,900
==========================================================================
Total capital loss carryforward $903,400,022
__________________________________________________________________________
==========================================================================
|
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $825,855,209 and $1,336,270,759, respectively.
Receivable for investments matured represents the estimated proceeds to the Fund by Candescent Technologies Corp. which is in default with respect to the principal payments on $60,700,000 par value, Senior Unsecured Guaranteed Subordinated Debentures, 8.00% which was due May 1, 2003. This estimate was determined in accordance with the fair valuation procedures authorized by the Board of Trustees.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $426,402,735 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (162,864,135) ============================================================================== Net unrealized appreciation of investment securities $263,538,600 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $3,013,953,645. |
NOTE 9--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
2003 2002
---------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 16,680,459 $ 167,057,570 16,193,575 $ 174,972,073
-----------------------------------------------------------------------------------------------------------------------------
Class B 8,128,480 78,572,729 9,302,039 97,387,968
-----------------------------------------------------------------------------------------------------------------------------
Class C 2,035,003 19,657,080 2,633,061 27,700,439
-----------------------------------------------------------------------------------------------------------------------------
Class R* 182,932 1,841,485 1,719 17,663
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class 53,551 570,090 45,275 481,439
=============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 3,640,846 37,843,518 717,246 7,724,451
-----------------------------------------------------------------------------------------------------------------------------
Class B (3,789,510) (37,843,518) (739,880) (7,724,451)
=============================================================================================================================
Reacquired:
Class A (58,788,618) (585,839,796) (99,779,666) (1,053,694,575)
-----------------------------------------------------------------------------------------------------------------------------
Class B (26,845,101) (255,811,861) (47,214,599) (480,743,039)
-----------------------------------------------------------------------------------------------------------------------------
Class C (5,102,475) (48,934,274) (8,599,959) (89,002,252)
-----------------------------------------------------------------------------------------------------------------------------
Class R* (29,999) (319,792) (5) (57)
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class (22,226) (230,215) (51,011) (541,529)
=============================================================================================================================
(63,856,658) $(623,436,984) (127,492,205) $(1,323,421,870)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
FS-57
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
---------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.57 $ 10.46 $ 18.07 $ 17.16 $ 13.32
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) 0.01(b) (0.03) (0.04)(a) 0.02
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.51 (0.90) (6.70) 2.30 4.39
=================================================================================================================================
Total from investment operations 1.55 (0.89) (6.73) 2.26 4.41
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.03)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.88) (1.35) (0.54)
=================================================================================================================================
Total distributions -- -- (0.88) (1.35) (0.57)
=================================================================================================================================
Net asset value, end of period $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 16.20% (8.51)% (38.75)% 13.60% 34.05%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,008,702 $2,096,866 $3,159,304 $5,801,869 $4,948,666
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.30%(d) 1.22% 1.16% 1.06% 1.05%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.30%(d) 1.22% 1.17% 1.08% 1.07%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.39%(d) 0.09%(b) (0.24)% (0.20)% 0.11%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 28% 103% 78% 80% 107%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective November 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share and the
ratio of net investment income to average net assets would have remained
the same. In accordance with the AICPA Audit and Accounting Guide for
Investment Companies, per share and ratios for periods prior to November
1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $1,989,929,149.
FS-58
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
---------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.24 $ 10.18 $ 17.72 $ 16.97 $ 13.24
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.08)(b) (0.13) (0.17)(a) (0.10)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.46 (0.86) (6.53) 2.27 4.37
=================================================================================================================================
Total from investment operations 1.43 (0.94) (6.66) 2.10 4.27
=================================================================================================================================
Less distributions from net realized gains -- -- (0.88) (1.35) (0.54)
=================================================================================================================================
Net asset value, end of period $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 15.48% (9.23)% (39.14)% 12.76% 33.06%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,149,943 $1,204,617 $1,719,470 $3,088,611 $2,206,752
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(d) 1.92% 1.86% 1.80% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.00%(d) 1.92% 1.87% 1.82% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.31)%(d) (0.61)%(b) (0.94)% (0.94)% (0.64)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 28% 103% 78% 80% 107%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective November 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share and the
ratio of net investment income to average net assets would have remained
the same. In accordance with the AICPA Audit and Accounting Guide for
Investment Companies, per share and ratios for periods prior to November
1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $1,150,310,322.
FS-59
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.27 $ 10.21 $ 17.77 $ 17.01 $ 13.27
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.08)(b) (0.13) (0.17)(a) (0.09)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.46 (0.86) (6.55) 2.28 4.37
===============================================================================================================================
Total from investment operations 1.43 (0.94) (6.68) 2.11 4.28
===============================================================================================================================
Less distributions from net realized gains -- -- (0.88) (1.35) (0.54)
===============================================================================================================================
Net asset value, end of period $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) 15.43% (9.21)% (39.14)% 12.78% 33.06%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $163,859 $170,444 $248,533 $412,872 $138,467
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(d) 1.92% 1.86% 1.80% 1.80%
-------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.00%(d) 1.92% 1.87% 1.82% 1.82%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(d) (0.61)%(b) (0.94)% (0.94)% (0.64)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 28% 103% 78% 80% 107%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective November 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share and the
ratio of net investment income to average net assets would have remained
the same. In accordance with the AICPA Audit and Accounting Guide for
Investment Companies, per share and ratios for periods prior to November
1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $162,156,695.
FS-60
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.56 $ 10.94
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.02(a) 0.00(b)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.50 (1.38)
=============================================================================================
Total from investment operations 1.52 (1.38)
=============================================================================================
Net asset value, end of period $11.08 $ 9.56
_____________________________________________________________________________________________
=============================================================================================
Total return(c) 15.90% (12.61)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,714 $ 16
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 1.50%(d) 1.42%(e)
=============================================================================================
Ratio of net investment income (loss) to average net assets 0.19%(d) (0.11)%(b)(e)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(f) 28% 103%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective November 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share and
ratio of net investment income to average net assets would have remained
the same. In accordance with the AICPA Audit and Accounting Guide for
Investment Companies, per share and ratios for periods prior to November
1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(d) Ratios are based on average daily net assets of $756,569.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-61
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.80 $10.67 $ 18.33 $17.33 $ 13.42
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09(a) 0.06(b) 0.04 0.52 0.09
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.56 (0.93) (6.82) 1.83 4.43
====================================================================================================================
Total from investment operations 1.65 (0.87) (6.78) 2.35 4.52
====================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.07)
--------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.88) (1.35) (0.54)
====================================================================================================================
Total distributions -- -- (0.88) (1.35) (0.61)
====================================================================================================================
Net asset value, end of period $11.45 $ 9.80 $ 10.67 $18.33 $ 17.33
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(c) 16.84% (8.15)% (38.46)% 14.02% 34.61%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,061 $1,457 $ 1,648 $3,234 $66,801
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 0.79%(d) 0.79% 0.68% 0.66% 0.65%
--------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 0.79%(d) 0.83% 0.69% 0.68% 0.67%
====================================================================================================================
Ratio of net investment income to average net assets 0.90%(d) 0.52%(b) 0.25% 0.20% 0.51%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 28% 103% 78% 80% 107%
____________________________________________________________________________________________________________________
====================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective November 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share and the
ratio of net investment income to average net assets would have remained
the same. In accordance with the AICPA Audit and Accounting Guide for
Investment Companies, per share and ratios prior to November 1, 2001
have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America.
(d) Ratios are based on average daily net assets of $1,652,566.
NOTE 11--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any
FS-62
NOTE 11--SUBSEQUENT EVENTS (CONTINUED)
registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-63
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Constellation Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Constellation Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Constellation Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States.
Houston, Texas /s/ Ernst & Young LLP December 16, 2003 |
FS-64
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
-------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.11%
ADVERTISING-1.53%
Lamar Advertising Co.(a) 3,000,000 $ 90,900,000
-------------------------------------------------------------------------
Omnicom Group Inc. 366,900 29,278,620
=========================================================================
120,178,620
=========================================================================
AEROSPACE & DEFENSE-1.33%
L-3 Communications Holdings, Inc.(a) 750,000 35,055,000
-------------------------------------------------------------------------
Lockheed Martin Corp. 1,500,000 69,540,000
=========================================================================
104,595,000
=========================================================================
AIR FREIGHT & LOGISTICS-0.64%
Expeditors International of Washington, Inc. 500,000 18,770,000
-------------------------------------------------------------------------
FedEx Corp. 420,800 31,879,808
=========================================================================
50,649,808
=========================================================================
AIRLINES-0.99%
Southwest Airlines Co. 4,000,000 77,600,000
=========================================================================
APPAREL RETAIL-2.22%
Chico's FAS, Inc.(a) 1,000,000 37,540,000
-------------------------------------------------------------------------
Gap, Inc. (The) 5,000,000 95,400,000
-------------------------------------------------------------------------
TJX Cos., Inc. (The) 2,000,000 41,980,000
=========================================================================
174,920,000
=========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.13%
Coach, Inc.(a) 289,700 10,275,659
=========================================================================
APPLICATION SOFTWARE-1.29%
Intuit Inc.(a) 1,250,000 62,475,000
-------------------------------------------------------------------------
Mercury Interactive Corp.(a) 839,800 39,000,312
=========================================================================
101,475,312
=========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.94%
Northern Trust Corp. 750,000 34,837,500
-------------------------------------------------------------------------
State Street Corp. 750,000 39,270,000
=========================================================================
74,107,500
=========================================================================
BIOTECHNOLOGY-2.11%
Amgen Inc.(a) 1,200,000 74,112,000
-------------------------------------------------------------------------
Genzyme Corp.(a) 1,350,900 62,006,310
-------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 544,600 29,724,268
=========================================================================
165,842,578
=========================================================================
BROADCASTING & CABLE TV-2.60%
Clear Channel Communications, Inc. 2,500,000 102,050,000
-------------------------------------------------------------------------
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
BROADCASTING & CABLE TV-(CONTINUED)
Univision Communications Inc.-Class A(a) 2,137,500 $ 72,568,125
-------------------------------------------------------------------------
Westwood One, Inc.(a) 1,000,000 29,930,000
=========================================================================
204,548,125
=========================================================================
CASINOS & GAMING-0.68%
MGM MIRAGE(a) 1,500,000 53,250,000
=========================================================================
COMMUNICATIONS EQUIPMENT-4.74%
Avaya Inc.(a) 2,000,000 25,880,000
-------------------------------------------------------------------------
Cisco Systems, Inc.(a) 6,000,000 125,880,000
-------------------------------------------------------------------------
Corning Inc.(a) 4,000,000 43,920,000
-------------------------------------------------------------------------
Foundry Networks, Inc.(a) 2,500,000 58,150,000
-------------------------------------------------------------------------
Juniper Networks, Inc.(a) 2,000,000 35,980,000
-------------------------------------------------------------------------
Nortel Networks Corp. (Canada)(a) 12,500,000 55,625,000
-------------------------------------------------------------------------
Scientific-Atlanta, Inc. 500,000 14,800,000
-------------------------------------------------------------------------
UTStarcom, Inc.(a) 389,300 12,262,950
=========================================================================
372,497,950
=========================================================================
COMPUTER & ELECTRONICS RETAIL-0.93%
Best Buy Co., Inc. 1,250,000 72,887,500
=========================================================================
COMPUTER HARDWARE-1.72%
Dell Inc.(a) 3,750,000 135,450,000
=========================================================================
COMPUTER STORAGE & PERIPHERALS-1.13%
EMC Corp.(a) 5,110,200 70,725,168
-------------------------------------------------------------------------
Western Digital Corp.(a) 1,369,300 18,417,085
=========================================================================
89,142,253
=========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.42%
Caterpillar, Inc. 700,000 51,296,000
-------------------------------------------------------------------------
Deere & Co. 1,000,000 60,620,000
=========================================================================
111,916,000
=========================================================================
CONSUMER FINANCE-3.07%
American Express Co. 2,250,000 105,592,500
-------------------------------------------------------------------------
MBNA Corp. 3,100,000 76,725,000
-------------------------------------------------------------------------
SLM Corp. 1,500,000 58,740,000
=========================================================================
241,057,500
=========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.62%
Fiserv, Inc.(a) 4,000,000 141,280,000
-------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 2,298,500 64,472,925
=========================================================================
205,752,925
=========================================================================
|
FS-65
MARKET
SHARES VALUE
-------------------------------------------------------------------------
DEPARTMENT STORES-0.39%
Nordstrom, Inc. 1,000,000 $ 30,490,000
=========================================================================
DIVERSIFIED BANKS-0.84%
Bank of America Corp. 500,000 37,865,000
-------------------------------------------------------------------------
Wells Fargo & Co. 500,000 28,160,000
=========================================================================
66,025,000
=========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.57%
Apollo Group, Inc.-Class A(a) 700,000 44,471,000
=========================================================================
DRUG RETAIL-0.77%
Walgreen Co. 1,750,000 60,935,000
=========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.48%
Agilent Technologies, Inc.(a) 1,500,000 37,380,000
=========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.44%
Molex Inc. 1,094,700 34,362,633
=========================================================================
EMPLOYMENT SERVICES-0.81%
Robert Half International Inc.(a) 2,707,400 63,921,714
=========================================================================
FOOD DISTRIBUTORS-0.53%
SYSCO Corp. 1,250,000 42,075,000
=========================================================================
FOOD RETAIL-0.38%
Whole Foods Market, Inc.(a) 500,000 29,620,000
=========================================================================
GENERAL MERCHANDISE STORES-1.26%
Dollar General Corp. 1,500,000 33,705,000
-------------------------------------------------------------------------
Family Dollar Stores, Inc. 1,500,000 65,415,000
=========================================================================
99,120,000
=========================================================================
HEALTH CARE DISTRIBUTORS-0.60%
Cardinal Health, Inc. 800,000 47,472,000
=========================================================================
HEALTH CARE EQUIPMENT-5.31%
Biomet, Inc. 3,770,675 135,216,406
-------------------------------------------------------------------------
Boston Scientific Corp.(a) 1,080,700 73,185,004
-------------------------------------------------------------------------
Guidant Corp. 489,800 24,984,698
-------------------------------------------------------------------------
Medtronic, Inc. 1,718,600 78,316,602
-------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 500,000 29,080,000
-------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 1,200,000 76,572,000
=========================================================================
417,354,710
=========================================================================
HEALTH CARE FACILITIES-0.48%
Health Management Associates, Inc.-Class A 1,706,000 37,787,900
=========================================================================
HEALTH CARE SERVICES-1.64%
AdvancePCS(a) 1,089,603 56,081,866
-------------------------------------------------------------------------
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
HEALTH CARE SERVICES-(CONTINUED)
Caremark Rx, Inc.(a) 2,000,000 $ 50,100,000
-------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 686,900 22,805,080
=========================================================================
128,986,946
=========================================================================
HOME ENTERTAINMENT SOFTWARE-0.38%
Electronic Arts Inc.(a) 300,000 29,712,000
=========================================================================
HOME IMPROVEMENT RETAIL-0.89%
Lowe's Cos., Inc. 1,182,400 69,678,832
=========================================================================
HOTELS, RESORTS & CRUISE LINES-1.51%
Carnival Corp. (Panama) 1,000,000 34,910,000
-------------------------------------------------------------------------
Marriott International, Inc.-Class A 500,000 21,600,000
-------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. (Liberia) 1,250,000 37,137,500
-------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 750,000 25,297,500
=========================================================================
118,945,000
=========================================================================
HOUSEHOLD PRODUCTS-0.79%
Procter & Gamble Co. (The) 629,400 61,863,726
=========================================================================
HYPERMARKETS & SUPER CENTERS-1.50%
Wal-Mart Stores, Inc. 2,000,000 117,900,000
=========================================================================
INDUSTRIAL CONGLOMERATES-0.52%
3M Co. 523,400 41,280,558
=========================================================================
INDUSTRIAL MACHINERY-2.00%
Danaher Corp. 500,000 41,425,000
-------------------------------------------------------------------------
Eaton Corp. 400,000 40,096,000
-------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 1,250,000 75,500,000
=========================================================================
157,021,000
=========================================================================
INSURANCE BROKERS-0.12%
Marsh & McLennan Cos., Inc. 222,900 9,528,975
=========================================================================
INTERNET RETAIL-1.40%
Amazon.com, Inc.(a) 750,000 40,815,000
-------------------------------------------------------------------------
eBay Inc.(a) 654,000 36,584,760
-------------------------------------------------------------------------
InterActiveCorp.(a) 884,400 32,466,324
=========================================================================
109,866,084
=========================================================================
INTERNET SOFTWARE & SERVICES-0.39%
Yahoo! Inc.(a) 700,000 30,590,000
=========================================================================
INVESTMENT BANKING & BROKERAGE-2.36%
Bear Stearns Cos. Inc. (The) 285,800 21,792,250
-------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 800,000 75,120,000
-------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 1,500,000 88,800,000
=========================================================================
185,712,250
=========================================================================
|
FS-66
MARKET
SHARES VALUE
-------------------------------------------------------------------------
IT CONSULTING & OTHER SERVICES-0.30%
Accenture Ltd.-Class A (Bermuda)(a) 1,012,000 $ 23,680,800
=========================================================================
MANAGED HEALTH CARE-2.20%
Aetna Inc. 593,700 34,084,317
-------------------------------------------------------------------------
UnitedHealth Group Inc. 1,323,400 67,334,592
-------------------------------------------------------------------------
WellPoint Health Networks Inc.(a) 806,000 71,653,400
=========================================================================
173,072,309
=========================================================================
MOTORCYCLE MANUFACTURERS-0.90%
Harley-Davidson, Inc. 1,500,000 71,115,000
=========================================================================
MOVIES & ENTERTAINMENT-1.45%
Pixar, Inc.(a) 500,000 34,405,000
-------------------------------------------------------------------------
Viacom Inc.-Class B 2,000,000 79,740,000
=========================================================================
114,145,000
=========================================================================
MULTI-LINE INSURANCE-0.77%
American International Group, Inc. 997,800 60,696,174
=========================================================================
OIL & GAS DRILLING-1.73%
ENSCO International Inc. 1,519,000 40,025,650
-------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 1,000,000 37,800,000
-------------------------------------------------------------------------
Noble Corp. (Cayman Islands)(a) 1,000,000 34,330,000
-------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 1,250,000 23,987,500
=========================================================================
136,143,150
=========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.25%
BJ Services Co.(a) 1,169,600 38,374,576
-------------------------------------------------------------------------
Smith International, Inc.(a) 900,000 33,507,000
-------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 750,000 26,062,500
=========================================================================
97,944,076
=========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.43%
Devon Energy Corp. 700,000 33,950,000
=========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.21%
Citigroup Inc. 2,000,000 94,800,000
=========================================================================
PERSONAL PRODUCTS-0.51%
Gillette Co. (The) 1,250,000 39,875,000
=========================================================================
PHARMACEUTICALS-5.29%
Allergan, Inc. 125,000 9,452,500
-------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 500,000 25,005,000
-------------------------------------------------------------------------
Lilly (Eli) & Co. 646,100 43,043,182
-------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 1,000,000 63,350,000
-------------------------------------------------------------------------
Pfizer Inc. 2,582,100 81,594,360
-------------------------------------------------------------------------
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
PHARMACEUTICALS-(CONTINUED)
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 2,244,800 $ 127,706,672
-------------------------------------------------------------------------
Wyeth 1,500,000 66,210,000
=========================================================================
416,361,714
=========================================================================
PROPERTY & CASUALTY INSURANCE-0.59%
Chubb Corp. (The) 700,000 46,767,000
=========================================================================
PUBLISHING-0.53%
Gannett Co., Inc. 500,000 42,055,000
=========================================================================
RESTAURANTS-2.80%
Brinker International, Inc.(a) 1,516,800 48,279,744
-------------------------------------------------------------------------
McDonald's Corp. 2,000,000 50,020,000
-------------------------------------------------------------------------
Outback Steakhouse, Inc. 1,213,300 50,958,600
-------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(a) 700,000 34,118,000
-------------------------------------------------------------------------
Wendy's International, Inc. 1,000,000 37,050,000
=========================================================================
220,426,344
=========================================================================
SEMICONDUCTOR EQUIPMENT-4.44%
Applied Materials, Inc.(a) 4,285,900 100,161,483
-------------------------------------------------------------------------
KLA-Tencor Corp.(a) 1,739,400 99,719,802
-------------------------------------------------------------------------
Lam Research Corp.(a) 4,000,000 114,960,000
-------------------------------------------------------------------------
Teradyne, Inc.(a) 1,500,000 34,170,000
=========================================================================
349,011,285
=========================================================================
SEMICONDUCTORS-6.89%
Analog Devices, Inc.(a) 3,000,000 132,990,000
-------------------------------------------------------------------------
Linear Technology Corp. 2,000,000 85,220,000
-------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 1,000,000 43,870,000
-------------------------------------------------------------------------
Maxim Integrated Products, Inc. 1,750,000 86,992,500
-------------------------------------------------------------------------
Microchip Technology Inc. 5,068,952 165,805,420
-------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan) 2,420,064 26,765,908
=========================================================================
541,643,828
=========================================================================
SPECIALIZED FINANCE-0.55%
Moody's Corp. 750,000 43,372,500
=========================================================================
SPECIALTY STORES-2.56%
Bed Bath & Beyond Inc.(a) 2,350,000 99,264,000
-------------------------------------------------------------------------
Staples, Inc.(a) 2,500,000 67,050,000
-------------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 1,000,000 35,330,000
=========================================================================
201,644,000
=========================================================================
SYSTEMS SOFTWARE-4.26%
Adobe Systems Inc. 650,000 28,496,000
-------------------------------------------------------------------------
Microsoft Corp. 8,500,000 222,275,000
-------------------------------------------------------------------------
Oracle Corp.(a) 2,500,000 29,900,000
-------------------------------------------------------------------------
|
FS-67
MARKET
SHARES VALUE
-------------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
VERITAS Software Corp.(a) 1,500,000 $ 54,225,000
=========================================================================
334,896,000
=========================================================================
TECHNOLOGY DISTRIBUTORS-1.71%
CDW Corp. 2,233,300 134,109,665
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.29%
Nextel Communications, Inc.-Class A(a) 1,820,000 44,044,000
-------------------------------------------------------------------------
Vodafone Group PLC (United Kingdom) 27,345,190 57,351,477
=========================================================================
101,395,477
=========================================================================
Total Common Stocks & Other Equity
Interests (Cost $5,798,440,332) 7,715,351,380
=========================================================================
MONEY MARKET FUNDS-2.44%
STIC Liquid Assets Portfolio(b) 95,933,174 95,933,174
-------------------------------------------------------------------------
STIC Prime Portfolio(b) 95,933,174 95,933,174
=========================================================================
Total Money Market Funds (Cost
$191,866,348) 191,866,348
=========================================================================
TOTAL INVESTMENTS-100.55% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$5,990,306,680) 7,907,217,728
=========================================================================
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-2.29%
STIC Liquid Assets Portfolio(b)(c) 155,180,095 $ 155,180,095
-------------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 24,938,485 24,938,485
=========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $180,118,580) 180,118,580
=========================================================================
TOTAL INVESTMENTS-102.84% (Cost
$6,170,425,260) 8,087,336,308
=========================================================================
OTHER ASSETS LESS LIABILITIES-(2.84%) (223,133,791)
=========================================================================
NET ASSETS-100.00% $7,864,202,517
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-68
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$5,798,440,332)* $ 7,715,351,380
------------------------------------------------------------
Investments in affiliated money market
funds (cost $371,984,928) 371,984,928
------------------------------------------------------------
Receivables for:
Investments sold 22,973,044
------------------------------------------------------------
Fund shares sold 3,766,990
------------------------------------------------------------
Dividends 3,973,670
------------------------------------------------------------
Investment for deferred compensation plan 314,171
------------------------------------------------------------
Other assets 125,652
============================================================
Total assets 8,118,489,835
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 44,898,225
------------------------------------------------------------
Fund shares reacquired 20,290,401
------------------------------------------------------------
Deferred compensation plan 314,171
------------------------------------------------------------
Collateral upon return of securities
loaned 180,118,580
------------------------------------------------------------
Accrued distribution fees 2,408,634
------------------------------------------------------------
Accrued trustees' fees 555,134
------------------------------------------------------------
Accrued transfer agent fees 4,285,116
------------------------------------------------------------
Accrued operating expenses 1,417,057
============================================================
Total liabilities 254,287,318
============================================================
Net assets applicable to shares outstanding $ 7,864,202,517
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 8,869,425,554
------------------------------------------------------------
Undistributed net investment income (loss) (844,799)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (2,921,289,286)
------------------------------------------------------------
Unrealized appreciation of investment
securities 1,916,911,048
============================================================
$ 7,864,202,517
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 6,825,022,555
____________________________________________________________
============================================================
Class B $ 688,587,420
____________________________________________________________
============================================================
Class C $ 193,585,049
____________________________________________________________
============================================================
Class R $ 2,857,476
____________________________________________________________
============================================================
Institutional Class $ 154,150,017
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 331,117,751
____________________________________________________________
============================================================
Class B 35,377,323
____________________________________________________________
============================================================
Class C 9,948,607
____________________________________________________________
============================================================
Class R 138,523
____________________________________________________________
============================================================
Institutional Class 6,953,267
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 20.61
------------------------------------------------------------
Offering price per share:
(Net asset value of $20.61 divided by
94.50%) $ 21.81
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.46
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.46
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 20.63
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 22.17
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $174,003,209
were on loan to brokers.
See Notes to Financial Statements.
FS-69
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $244,235) $ 42,795,714
----------------------------------------------------------------------------
Dividends from affiliated money market funds 2,446,905
----------------------------------------------------------------------------
Securities lending 144,803
============================================================================
Total investment income 45,387,422
============================================================================
EXPENSES:
Advisory fees 46,349,081
----------------------------------------------------------------------------
Administrative services fees 696,174
----------------------------------------------------------------------------
Custodian fees 451,569
----------------------------------------------------------------------------
Distribution fees:
Class A 19,315,644
----------------------------------------------------------------------------
Class B 6,227,801
----------------------------------------------------------------------------
Class C 1,792,081
----------------------------------------------------------------------------
Class R 6,237
----------------------------------------------------------------------------
Transfer agent fees 23,165,160
----------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 105,564
----------------------------------------------------------------------------
Trustees' fees 142,695
----------------------------------------------------------------------------
Other 2,473,308
============================================================================
Total expenses 100,725,314
============================================================================
Less: Fees waived and expense offset arrangements (753,706)
============================================================================
Net expenses 99,971,608
============================================================================
Net investment income (loss) (54,584,186)
============================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (455,564,558)
----------------------------------------------------------------------------
Foreign currencies 527,909
----------------------------------------------------------------------------
Option contracts written 291,491
============================================================================
(454,745,158)
============================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 1,834,296,432
----------------------------------------------------------------------------
Foreign currencies 17,825
----------------------------------------------------------------------------
Option contracts written (123,292)
============================================================================
1,834,190,965
============================================================================
Net gain from investment securities, foreign currencies and
option contracts 1,379,445,807
============================================================================
Net increase in net assets resulting from operations $1,324,861,621
____________________________________________________________________________
============================================================================
|
See Notes to Financial Statements.
FS-70
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (54,584,186) $ (81,004,558)
------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (454,745,158) (1,231,119,667)
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and option contracts 1,834,190,965 143,436,189
================================================================================================
Net increase (decrease) in net assets resulting from
operations 1,324,861,621 (1,168,688,036)
================================================================================================
Share transactions-net:
Class A (1,112,282,235) (1,905,685,542)
------------------------------------------------------------------------------------------------
Class B (46,666,906) (89,586,163)
------------------------------------------------------------------------------------------------
Class C (22,091,083) (44,303,197)
------------------------------------------------------------------------------------------------
Class R 2,235,274 204,500
------------------------------------------------------------------------------------------------
Institutional Class 5,433,008 (10,243,640)
================================================================================================
Net increase (decrease) in net assets resulting from
share transactions (1,173,371,942) (2,049,614,042)
================================================================================================
Net increase (decrease) in net assets 151,489,679 (3,218,302,078)
================================================================================================
NET ASSETS:
Beginning of year 7,712,712,838 10,931,014,916
================================================================================================
End of year (including undistributed net investment income
(loss) of $(844,799) and $(770,211) for 2003 and 2002,
respectively) $ 7,864,202,517 $ 7,712,712,838
________________________________________________________________________________________________
================================================================================================
|
See Notes to Financial Statements.
FS-71
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADR's, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- 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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in
FS-72
foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the 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. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. 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.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the first $30 million of the Fund's average daily net assets, plus 0.75% of the Fund's average daily net assets in excess of $30 million to and including $150 million, plus 0.625% of the Fund's average daily net assets in excess of $150 million. AIM has voluntarily agreed to waive advisory fees payable by the Fund to AIM at the annual rate of 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum waiver of 0.175% on net assets in excess of $35 billion. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). Voluntary fee waivers may be modified or discontinued with approval of Board of Trustees without further notice to investors. For the year ended October 31, 2003, AIM waived fees of $638,100. Under the terms of a master sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $696,174 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc. a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $11,253,012 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans,
FS-73
for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $19,315,644, $6,227,801, $1,792,081 and $6,237, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During year ended October 31, 2003, AIM Distributors retained $829,628 in front-end sales commissions from the sale of Class A shares and $4,130, $68 and $12,817 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $114,189 and reductions in custodian fees of $1,417 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $115,606.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $14,087 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $174,003,209 were on loan to brokers. The loans were secured by cash collateral of $180,118,580 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2003, the Fund received fees of $144,803 for securities lending.
FS-74
NOTE 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
------------------------------------------------------------
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------
Beginning of year 1,551 $ 398,595
------------------------------------------------------------
Written 3,088 1,040,859
------------------------------------------------------------
Exercised (3,264) (1,147,963)
------------------------------------------------------------
Expired (1,375) (291,491)
------------------------------------------------------------
End of year -- $ --
____________________________________________________________
============================================================
|
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002.
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Unrealized appreciation -- investments $ 1,905,448,839 ------------------------------------------------------------ Temporary book/tax differences (844,799) ------------------------------------------------------------ Capital loss carryforward (2,909,827,077) ------------------------------------------------------------ Shares of beneficial interest 8,869,425,554 ============================================================ Total net assets $ 7,864,202,517 ____________________________________________________________ ============================================================ |
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable to the tax deferral of losses on wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
-----------------------------------------------------------
October 31, 2009 $1,224,074,030
-----------------------------------------------------------
October 31, 2010 1,223,985,487
-----------------------------------------------------------
October 31, 2011 461,767,560
===========================================================
Total capital loss carryforward $2,909,827,077
___________________________________________________________
===========================================================
|
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $3,370,231,624 and $4,537,133,153, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
------------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $2,147,646,200
------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (242,197,361)
============================================================
Net unrealized appreciation of investment
securities $1,905,448,839
____________________________________________________________
============================================================
Cost of investments for tax purposes is $6,181,887,469.
|
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency transactions and net operating losses, on October 31, 2003, undistributed net investment income was increased by $54,509,598, undistributed net realized gains decreased by $527,909 and shares of beneficial interest decreased by $53,981,689. This reclassification had no effect on the net assets of the Fund.
FS-75
NOTE 11--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
--------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------
2003 2002
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 40,892,692 $ 728,901,495 48,969,691 $ 970,494,859
--------------------------------------------------------------------------------------------------------------------------------
Class B 4,399,643 74,587,779 5,811,283 111,506,491
--------------------------------------------------------------------------------------------------------------------------------
Class C 1,764,643 29,858,199 2,391,741 46,150,281
--------------------------------------------------------------------------------------------------------------------------------
Class R* 163,302 2,916,332 13,083 204,591
--------------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,117,656 21,391,286 6,254,346 139,801,926
================================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 325,830 5,894,532 223,534 4,426,684
--------------------------------------------------------------------------------------------------------------------------------
Class B (344,006) (5,894,532) (234,440) (4,426,684)
================================================================================================================================
Reacquired:
Class A (104,213,879) (1,847,078,262) (147,108,087) (2,880,607,085)
--------------------------------------------------------------------------------------------------------------------------------
Class B (6,899,964) (115,360,153) (10,685,339) (196,665,970)
--------------------------------------------------------------------------------------------------------------------------------
Class C (3,090,330) (51,949,282) (4,824,172) (90,453,478)
--------------------------------------------------------------------------------------------------------------------------------
Class R* (37,857) (681,058) (5) (91)
--------------------------------------------------------------------------------------------------------------------------------
Institutional Class (833,861) (15,958,278) (6,757,582) (150,045,566)
================================================================================================================================
(66,756,131) $(1,173,371,942) (105,945,947) $(2,049,614,042)
________________________________________________________________________________________________________________________________
================================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.20 $ 19.72 $ 43.50 $ 34.65 $ 26.37
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.15)(a) (0.12) (0.26) (0.17)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.53 (2.37) (16.24) 12.39 9.18
=================================================================================================================================
Total from investment operations 3.41 (2.52) (16.36) 12.13 9.01
=================================================================================================================================
Less distributions from net realized gains -- -- (7.42) (3.28) (0.73)
=================================================================================================================================
Net asset value, end of period $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 19.83% (12.78)% (43.10)% 36.56% 34.81%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,825,023 $6,780,055 $9,703,277 $19,268,977 $14,292,905
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.29%(c) 1.26% 1.14% 1.08% 1.10%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.30%(c) 1.27% 1.17% 1.11% 1.12%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.67)%(c) (0.74)% (0.46)% (0.61)% (0.50)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 47% 57% 75% 88% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $6,438,548,158.
FS-76
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.36 $ 18.89 $ 42.28 $ 34.00 $ 26.11
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.23)(a) (0.27)(a) (0.28) (0.58)(a) (0.42)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.33 (2.26) (15.69) 12.14 9.04
=================================================================================================================================
Total from investment operations 3.10 (2.53) (15.97) 11.56 8.62
=================================================================================================================================
Less distributions from net realized gains -- -- (7.42) (3.28) (0.73)
=================================================================================================================================
Net asset value, end of period $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 18.95% (13.39)% (43.49)% 35.51% 33.64%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $688,587 $625,294 $818,343 $1,315,524 $589,718
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.99%(c) 1.96% 1.86% 1.85% 1.98%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.00%(c) 1.97% 1.89% 1.88% 2.00%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.37)%(c) (1.44)% (1.17)% (1.38)% (1.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 47% 57% 75% 88% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $622,780,089.
CLASS C
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.36 $ 18.88 $ 42.27 $ 33.99 $ 26.10
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.23)(a) (0.27)(a) (0.29) (0.59)(a) (0.42)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.33 (2.25) (15.68) 12.15 9.04
===============================================================================================================================
Total from investment operations 3.10 (2.52) (15.97) 11.56 8.62
===============================================================================================================================
Less distributions from net realized gains -- -- (7.42) (3.28) (0.73)
===============================================================================================================================
Net asset value, end of period $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 18.95% (13.35)% (43.51)% 35.52% 33.65%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $193,585 $184,393 $258,786 $434,544 $161,490
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.99%(c) 1.96% 1.86% 1.85% 1.98%
-------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.00%(c) 1.97% 1.89% 1.88% 2.00%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.37)%(c) (1.44)% (1.17)% (1.38)% (1.38)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 47% 57% 75% 88% 62%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $179,208,048.
FS-77
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.26 $ 19.82
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.16)(a) (0.07)(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.53 (2.49)
=============================================================================================
Total from investment operations 3.37 (2.56)
=============================================================================================
Net asset value, end of period $20.63 $ 17.26
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 19.52% (12.92)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,857 $ 226
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.49%(c) 1.53%(d)
---------------------------------------------------------------------------------------------
Without fee waivers 1.50%(c) 1.54%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (0.87)%(c) (1.01)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 47% 57%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $1,247,495.
(d) Annualized.
(e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.40 $ 21.00 $ 45.55 $ 36.01 $ 27.25
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.06) 0.01 (0.09) (0.01)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.80 (2.54) (17.14) 12.91 9.50
=========================================================================================================================
Total from investment operations 3.77 (2.60) (17.13) 12.82 9.49
=========================================================================================================================
Less distributions from net realized gains -- -- (7.42) (3.28) (0.73)
=========================================================================================================================
Net asset value, end of period $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 20.49% (12.38)% (42.80)% 37.14% 35.46%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $154,150 $122,746 $150,609 $288,097 $244,369
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.75%(c) 0.80% 0.65% 0.65% 0.64%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.76%(c) 0.81% 0.68% 0.68% 0.66%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.13)%(c) (0.28)% 0.03% (0.18)% (0.04)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 47% 57% 75% 88% 62%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $132,069,108.
FS-78
NOTE 13--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds--Registered Trademark--, which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-79
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Weingarten Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Weingarten Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Weingarten Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States.
Houston, Texas -s- ERNST & YOUNG LLP December 16, 2003
FS-80
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
-----------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.50%
ADVERTISING-0.85%
Omnicom Group Inc. 300,000 $ 23,940,000
=============================================================================
APPAREL RETAIL-1.53%
Gap, Inc. (The) 2,250,000 42,930,000
=============================================================================
APPLICATION SOFTWARE-0.55%
PeopleSoft, Inc.(a) 750,000 15,570,000
=============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.67%
Franklin Resources, Inc. 400,000 18,968,000
=============================================================================
BIOTECHNOLOGY-3.30%
Amgen Inc.(a) 750,000 46,320,000
-----------------------------------------------------------------------------
Genentech, Inc.(a) 400,000 32,788,000
-----------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 250,000 13,645,000
=============================================================================
92,753,000
=============================================================================
BREWERS-0.53%
Anheuser-Busch Cos., Inc. 300,000 14,778,000
=============================================================================
CASINOS & GAMING-0.76%
International Game Technology 650,000 21,287,500
=============================================================================
COMMUNICATIONS EQUIPMENT-6.32%
Cisco Systems, Inc.(a) 4,000,000 83,920,000
-----------------------------------------------------------------------------
Corning Inc.(a) 2,000,000 21,960,000
-----------------------------------------------------------------------------
Juniper Networks, Inc.(a) 1,250,000 22,487,500
-----------------------------------------------------------------------------
Motorola, Inc. 2,000,000 27,060,000
-----------------------------------------------------------------------------
Nortel Networks Corp. (Canada)(a) 5,000,000 22,250,000
=============================================================================
177,677,500
=============================================================================
COMPUTER & ELECTRONICS RETAIL-1.66%
Best Buy Co., Inc. 800,000 46,648,000
=============================================================================
COMPUTER HARDWARE-2.60%
Dell Inc.(a) 1,400,000 50,568,000
-----------------------------------------------------------------------------
International Business Machines Corp. 250,000 22,370,000
=============================================================================
72,938,000
=============================================================================
COMPUTER STORAGE & PERIPHERALS-2.05%
EMC Corp.(a) 3,000,000 41,520,000
-----------------------------------------------------------------------------
Seagate Technology (Cayman Islands) 700,000 16,086,000
=============================================================================
57,606,000
=============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.54%
Deere & Co. 250,000 15,155,000
=============================================================================
|
-----------------------------------------------------------------------------
MARKET
SHARES VALUE
CONSUMER FINANCE-3.03%
American Express Co. 750,000 $ 35,197,500
-----------------------------------------------------------------------------
MBNA Corp. 1,150,000 28,462,500
-----------------------------------------------------------------------------
SLM Corp. 550,000 21,538,000
=============================================================================
85,198,000
=============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.15%
Affiliated Computer Services, Inc.-Class A(a) 300,000 14,679,000
-----------------------------------------------------------------------------
First Data Corp. 300,000 10,710,000
-----------------------------------------------------------------------------
Fiserv, Inc.(a) 550,000 19,426,000
-----------------------------------------------------------------------------
Paychex, Inc. 400,000 15,568,000
=============================================================================
60,383,000
=============================================================================
DIVERSIFIED BANKS-0.57%
Wachovia Corp. 350,000 16,054,500
=============================================================================
DIVERSIFIED CAPITAL MARKETS-1.15%
J.P. Morgan Chase & Co. 900,000 32,310,000
=============================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.90%
Apollo Group, Inc.-Class A(a) 300,000 19,059,000
-----------------------------------------------------------------------------
Cendant Corp.(a) 2,250,000 45,967,500
-----------------------------------------------------------------------------
H&R Block, Inc. 350,000 16,481,500
=============================================================================
81,508,000
=============================================================================
DRUG RETAIL-0.50%
CVS Corp. 400,000 14,072,000
=============================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.80%
Agilent Technologies, Inc.(a) 900,000 22,428,000
=============================================================================
FOOTWEAR-0.57%
NIKE, Inc.-Class B 250,000 15,975,000
=============================================================================
GENERAL MERCHANDISE STORES-1.25%
Family Dollar Stores, Inc. 350,000 15,263,500
-----------------------------------------------------------------------------
Target Corp. 500,000 19,870,000
=============================================================================
35,133,500
=============================================================================
HEALTH CARE EQUIPMENT-4.32%
Becton, Dickinson & Co. 350,000 12,796,000
-----------------------------------------------------------------------------
Boston Scientific Corp.(a) 850,000 57,562,000
-----------------------------------------------------------------------------
Guidant Corp. 400,000 20,404,000
-----------------------------------------------------------------------------
Medtronic, Inc. 250,000 11,392,500
-----------------------------------------------------------------------------
|
FS-81
MARKET
SHARES VALUE
-----------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-(CONTINUED)
Zimmer Holdings, Inc.(a) 300,000 $ 19,143,000
=============================================================================
121,297,500
=============================================================================
HEALTH CARE SERVICES-0.89%
Caremark Rx, Inc.(a) 1,000,000 25,050,000
=============================================================================
HEALTH CARE SUPPLIES-0.98%
Alcon, Inc. (Switzerland) 500,000 27,555,000
=============================================================================
HOME ENTERTAINMENT SOFTWARE-0.88%
Electronic Arts Inc.(a) 250,000 24,760,000
=============================================================================
HOME IMPROVEMENT RETAIL-1.65%
Home Depot, Inc. (The) 1,250,000 46,337,500
=============================================================================
HOTELS, RESORTS & CRUISE LINES-0.48%
Starwood Hotels & Resorts Worldwide, Inc. 400,000 13,492,000
=============================================================================
HOUSEHOLD PRODUCTS-1.91%
Colgate-Palmolive Co. 175,000 9,308,250
-----------------------------------------------------------------------------
Procter & Gamble Co. (The) 450,000 44,230,500
=============================================================================
53,538,750
=============================================================================
INDUSTRIAL CONGLOMERATES-2.23%
Tyco International Ltd. (Bermuda) 3,000,000 62,640,000
=============================================================================
INDUSTRIAL MACHINERY-1.17%
Danaher Corp. 250,000 20,712,500
-----------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 200,000 12,080,000
=============================================================================
32,792,500
=============================================================================
INTERNET RETAIL-3.45%
Amazon.com, Inc.(a) 1,000,000 54,420,000
-----------------------------------------------------------------------------
eBay Inc.(a) 400,000 22,376,000
-----------------------------------------------------------------------------
InterActiveCorp.(a) 550,000 20,190,500
=============================================================================
96,986,500
=============================================================================
INTERNET SOFTWARE & SERVICES-1.55%
Yahoo! Inc.(a) 1,000,000 43,700,000
=============================================================================
INVESTMENT BANKING & BROKERAGE-4.93%
Charles Schwab Corp. (The) 1,650,000 22,374,000
-----------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 500,000 46,950,000
-----------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 550,000 39,600,000
-----------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 500,000 29,600,000
=============================================================================
138,524,000
=============================================================================
IT CONSULTING & OTHER SERVICES-1.04%
Accenture Ltd.-Class A (Bermuda)(a) 1,250,000 29,250,000
=============================================================================
MANAGED HEALTH CARE-3.13%
Aetna Inc. 1,000,000 57,410,000
-----------------------------------------------------------------------------
|
-----------------------------------------------------------------------------
MARKET
SHARES VALUE
MANAGED HEALTH CARE-(CONTINUED)
UnitedHealth Group Inc. 600,000 $ 30,528,000
=============================================================================
87,938,000
=============================================================================
MOTORCYCLE MANUFACTURERS-0.42%
Harley-Davidson, Inc. 250,000 11,852,500
=============================================================================
MOVIES & ENTERTAINMENT-0.99%
Viacom Inc.-Class B 700,000 27,909,000
=============================================================================
MULTI-LINE INSURANCE-0.76%
American International Group, Inc. 350,000 21,290,500
=============================================================================
OIL & GAS DRILLING-0.73%
ENSCO International Inc. 350,000 9,222,500
-----------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 300,000 11,340,000
=============================================================================
20,562,500
=============================================================================
OIL & GAS EQUIPMENT & SERVICES-0.33%
Schlumberger Ltd. (Netherlands) 200,000 9,394,000
=============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.53%
Citigroup Inc. 1,500,000 71,100,000
=============================================================================
PHARMACEUTICALS-5.47%
Johnson & Johnson 550,000 27,681,500
-----------------------------------------------------------------------------
Lilly (Eli) & Co. 325,000 21,651,500
-----------------------------------------------------------------------------
Pfizer Inc. 1,350,000 42,660,000
-----------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 350,000 19,911,500
-----------------------------------------------------------------------------
Wyeth 950,000 41,933,000
=============================================================================
153,837,500
=============================================================================
SEMICONDUCTOR EQUIPMENT-3.24%
Applied Materials, Inc.(a) 1,250,000 29,212,500
-----------------------------------------------------------------------------
Novellus Systems, Inc.(a) 1,500,000 61,935,000
=============================================================================
91,147,500
=============================================================================
SEMICONDUCTORS-9.26%
Analog Devices, Inc.(a) 1,000,000 44,330,000
-----------------------------------------------------------------------------
Intel Corp. 1,800,000 59,490,000
-----------------------------------------------------------------------------
Linear Technology Corp. 700,000 29,827,000
-----------------------------------------------------------------------------
Maxim Integrated Products, Inc. 600,000 29,826,000
-----------------------------------------------------------------------------
Microchip Technology Inc. 1,000,000 32,710,000
-----------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan) 2,000,000 22,120,000
-----------------------------------------------------------------------------
Texas Instruments Inc. 1,450,000 41,934,000
=============================================================================
260,237,000
=============================================================================
SOFT DRINKS-0.77%
PepsiCo, Inc. 450,000 21,519,000
=============================================================================
|
FS-82
MARKET
SHARES VALUE
-----------------------------------------------------------------------------
SPECIALTY CHEMICALS-0.48%
Ecolab Inc. 500,000 $ 13,445,000
=============================================================================
SPECIALTY STORES-1.32%
Bed Bath & Beyond Inc.(a) 500,000 21,120,000
-----------------------------------------------------------------------------
Staples, Inc.(a) 600,000 16,092,000
=============================================================================
37,212,000
=============================================================================
SYSTEMS SOFTWARE-7.31%
Computer Associates International, Inc. 1,850,000 43,512,000
-----------------------------------------------------------------------------
Microsoft Corp. 3,500,000 91,525,000
-----------------------------------------------------------------------------
Oracle Corp.(a) 1,500,000 17,940,000
-----------------------------------------------------------------------------
VERITAS Software Corp.(a) 1,450,000 52,417,500
=============================================================================
205,394,500
=============================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,125,580,640) 2,712,075,750
=============================================================================
MONEY MARKET FUNDS-2.59%
STIC Liquid Assets Portfolio(b) 36,428,079 36,428,079
-----------------------------------------------------------------------------
STIC Prime Portfolio(b) 36,428,079 36,428,079
=============================================================================
Total Money Market Funds (Cost
$72,856,158) 72,856,158
=============================================================================
TOTAL INVESTMENTS-99.09% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $2,198,436,798) 2,784,931,908
=============================================================================
|
-----------------------------------------------------------------------------
MARKET
SHARES VALUE
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.39%
STIC Liquid Assets Portfolio(b)(c) 38,996,800 $ 38,996,800
=============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $38,996,800) 38,996,800
=============================================================================
TOTAL INVESTMENTS-100.48% (Cost
$2,237,433,598) 2,823,928,708
=============================================================================
OTHER ASSETS LESS LIABILITIES-(0.48%) (13,478,280)
=============================================================================
NET ASSETS-100.00% $2,810,450,428
_____________________________________________________________________________
=============================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-83
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$2,125,580,640)* $ 2,712,075,750
------------------------------------------------------------
Investments in affiliated money market
funds (cost $111,852,958) 111,852,958
------------------------------------------------------------
Foreign currencies, at value (cost $361) 368
------------------------------------------------------------
Cash 38,826
------------------------------------------------------------
Receivables for:
Investments sold 56,632,123
------------------------------------------------------------
Fund shares sold 752,372
------------------------------------------------------------
Dividends 1,956,386
------------------------------------------------------------
Investment for deferred compensation plan 202,866
------------------------------------------------------------
Other assets 118,747
============================================================
Total assets 2,883,630,396
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 24,490,221
------------------------------------------------------------
Fund shares reacquired 5,738,163
------------------------------------------------------------
Deferred compensation plan 202,866
------------------------------------------------------------
Collateral upon return of securities
loaned 38,996,800
------------------------------------------------------------
Accrued distribution fees 1,089,622
------------------------------------------------------------
Accrued trustees' fees 267,499
------------------------------------------------------------
Accrued transfer agent fees 1,913,397
------------------------------------------------------------
Accrued operating expenses 481,400
============================================================
Total liabilities 73,179,968
============================================================
Net assets applicable to shares outstanding $ 2,810,450,428
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 5,800,081,560
------------------------------------------------------------
Undistributed net investment income (loss) (462,775)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (3,575,663,474)
------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 586,495,117
============================================================
$ 2,810,450,428
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 2,160,823,000
____________________________________________________________
============================================================
Class B $ 555,778,704
____________________________________________________________
============================================================
Class C $ 91,324,993
____________________________________________________________
============================================================
Class R $ 311,194
____________________________________________________________
============================================================
Institutional Class $ 2,212,537
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 186,477,767
____________________________________________________________
============================================================
Class B 51,888,597
____________________________________________________________
============================================================
Class C 8,518,684
____________________________________________________________
============================================================
Class R 26,927
____________________________________________________________
============================================================
Institutional Class 181,315
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 11.59
------------------------------------------------------------
Offering price per share:
(Net asset value of $11.59 divided by
94.50%) $ 12.26
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.71
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.72
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 11.56
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.20
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $37,694,563
were on loan to brokers.
See Notes to Financial Statements.
FS-84
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $119,306) $ 20,368,727
---------------------------------------------------------------------------
Dividends from affiliated money market funds 414,720
---------------------------------------------------------------------------
Interest 3,316
---------------------------------------------------------------------------
Securities lending 71,442
===========================================================================
Total investment income 20,858,205
===========================================================================
EXPENSES:
Advisory fees 17,030,956
---------------------------------------------------------------------------
Administrative services fees 519,857
---------------------------------------------------------------------------
Custodian fees 187,065
---------------------------------------------------------------------------
Distribution fees:
Class A 6,092,977
---------------------------------------------------------------------------
Class B 5,246,170
---------------------------------------------------------------------------
Class C 852,575
---------------------------------------------------------------------------
Class R 920
---------------------------------------------------------------------------
Transfer agent fees 12,045,211
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,175
---------------------------------------------------------------------------
Trustees' fees 56,657
---------------------------------------------------------------------------
Other 1,125,910
===========================================================================
Total expenses 43,159,473
===========================================================================
Less: Fees waived and expense offset arrangements (56,902)
===========================================================================
Net expenses 43,102,571
===========================================================================
Net investment income (loss) (22,244,366)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (151,651,661)
---------------------------------------------------------------------------
Foreign currencies 115,427
---------------------------------------------------------------------------
Option contracts written (1,282,993)
===========================================================================
(152,819,227)
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 703,746,614
---------------------------------------------------------------------------
Foreign currencies (19)
---------------------------------------------------------------------------
Option contracts written (44,617)
===========================================================================
703,701,978
===========================================================================
Net gain from investment securities, foreign currencies and
option contracts 550,882,751
===========================================================================
Net increase in net assets resulting from operations $ 528,638,385
___________________________________________________________________________
===========================================================================
|
See Notes to Financial Statements.
FS-85
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
-----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (22,244,366) $ (32,392,421)
-----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures contracts and option
contracts (152,819,227) (796,583,815)
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts 703,701,978 (246,187,556)
===============================================================================================
Net increase (decrease) in net assets resulting from
operations 528,638,385 (1,075,163,792)
===============================================================================================
Share transactions-net:
Class A (354,029,189) (1,064,806,254)
-----------------------------------------------------------------------------------------------
Class B (78,758,321) (180,109,268)
-----------------------------------------------------------------------------------------------
Class C (11,803,823) (30,575,415)
-----------------------------------------------------------------------------------------------
Class R 190,176 72,385
-----------------------------------------------------------------------------------------------
Institutional Class (83,682) (5,419,461)
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (444,484,839) (1,280,838,013)
===============================================================================================
Net increase (decrease) in net assets 84,153,546 (2,356,001,805)
===============================================================================================
NET ASSETS:
Beginning of year 2,726,296,882 5,082,298,687
===============================================================================================
End of year (including undistributed net investment income
(loss) of $(462,775) and $(437,153) for 2003 and 2002,
respectively) $2,810,450,428 $ 2,726,296,882
_______________________________________________________________________________________________
===============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 provide growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-
FS-86
term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- 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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the 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. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. 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.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
H. PUT OPTIONS -- The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of
FS-87
the securities hedged. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased or sold.
I. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks also include to varying degrees, the risk of loss in excess of the variation margin.
J. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the first $30 million of the Fund's average daily net assets, plus 0.75% of the Fund's average daily net assets in excess of $30 million up to and including $350 million, plus 0.625% of the Fund's average daily net assets in excess of $350 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $8,168. Under the terms of a master sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $519,857 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as AIM Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $6,264,097 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $6,092,977, $5,246,170, $852,575 and $920, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $286,925 in front-end sales commissions from the sale of Class A shares and $3,720, $0, $7,667 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $47,339 and reductions in custodian fees of $1,395 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $48,734.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $6,495 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as
FS-88
counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $37,694,563 were on loan to brokers. The loans were secured by cash collateral of $38,996,800 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $71,442 for securities lending.
NOTE 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
------------------------------------------------------------
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------
Beginning of year 2,500 $ 585,867
------------------------------------------------------------
Written 87,660 14,767,945
------------------------------------------------------------
Closed (68,350) (12,127,993)
------------------------------------------------------------
Exercised (20,307) (2,862,014)
------------------------------------------------------------
Expired (1,503) (363,805)
============================================================
End of year -- $ --
____________________________________________________________
============================================================
|
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002.
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Unrealized appreciation -- investments $ 529,571,996 ------------------------------------------------------------ Temporary book/tax differences (462,775) ------------------------------------------------------------ Capital loss carryforward (3,518,740,353) ------------------------------------------------------------ Shares of beneficial interest 5,800,081,560 ============================================================ Total net assets $ 2,810,450,428 ____________________________________________________________ ============================================================ |
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales and the tax deferral of losses on certain option transactions. Amount includes appreciation on foreign currencies of $7.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses.
FS-89
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------------------------------------------------------------------------
October 31, 2009 $2,559,101,338
------------------------------------------------------------------------------
October 31, 2010 763,027,747
------------------------------------------------------------------------------
October 31, 2011 196,611,268
==============================================================================
Total capital loss carryforward $3,518,740,353
______________________________________________________________________________
==============================================================================
|
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $2,894,591,510 and $3,402,084,060, respectively.
UNREALIZED APPRECIATION (DEPRECIATION)OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $572,406,984 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (42,834,995) ============================================================================== Net unrealized appreciation of investment securities $529,571,989 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $2,294,356,719. |
NOTE 10--RECLASSIFICATIONS OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions and net operating losses on October 31, 2003, undistributed net investment income increased by $22,218,744, undistributed net realized gains decreased by $115,427 and shares of beneficial interest decreased by $22,103,317. This reclassification had no effect on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
2003 2002
---------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 10,192,956 $ 102,256,843 16,597,940 $ 199,251,597
-----------------------------------------------------------------------------------------------------------------------------
Class B 5,051,931 47,044,808 5,995,984 66,787,479
-----------------------------------------------------------------------------------------------------------------------------
Class C 1,715,252 15,941,057 1,919,777 21,362,371
-----------------------------------------------------------------------------------------------------------------------------
Class R* 23,136 234,973 7,975 72,385
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class 16,638 177,847 45,598 504,589
=============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,369,192 14,331,798 368,013 4,307,233
-----------------------------------------------------------------------------------------------------------------------------
Class B (1,477,850) (14,331,798) (393,806) (4,307,233)
=============================================================================================================================
Reacquired:
Class A (47,251,093) (470,617,830) (111,225,206) (1,268,365,084)
-----------------------------------------------------------------------------------------------------------------------------
Class B (12,154,199) (111,471,331) (22,942,810) (242,589,514)
-----------------------------------------------------------------------------------------------------------------------------
Class C (2,990,841) (27,744,880) (4,815,984) (51,937,786)
-----------------------------------------------------------------------------------------------------------------------------
Class R* (4,184) (44,797) -- --
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class (25,361) (261,529) (438,298) (5,924,050)
=============================================================================================================================
(45,534,423) $(444,484,839) (114,880,817) $(1,280,838,013)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
FS-90
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.47 $ 12.65 $ 28.16 $ 28.31 $ 21.72
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.07)(a) (0.10) (0.14)(a) (0.10)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 2.19 (3.11) (11.87) 3.18 8.16
=================================================================================================================================
Total from investment operations 2.12 (3.18) (11.97) 3.04 8.06
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.01)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (3.54) (3.19) (1.46)
=================================================================================================================================
Total distributions -- -- (3.54) (3.19) (1.47)
=================================================================================================================================
Net asset value, end of period $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 22.39% (25.14)% (47.38)% 10.61% 38.62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,160,823 $2,104,660 $4,001,552 $8,948,781 $8,089,739
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.47%(c) 1.33% 1.21% 1.03% 1.03%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.47%(c) 1.33% 1.22% 1.07% 1.08%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.68)%(c) (0.64)% (0.56)% (0.45)% (0.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 111% 217% 240% 145% 124%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $2,030,992,456.
CLASS B
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.82 $ 11.86 $ 26.82 $ 27.29 $ 21.12
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14) (0.15)(a) (0.21) (0.36)(a) (0.30)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.03 (2.89) (11.21) 3.08 7.93
===============================================================================================================================
Total from investment operations 1.89 (3.04) (11.42) 2.72 7.63
===============================================================================================================================
Less distributions from net realized gains -- -- (3.54) (3.19) (1.46)
===============================================================================================================================
Net asset value, end of period $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 21.43% (25.63)% (47.75)% 9.76% 37.59%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $555,779 $533,224 $922,476 $1,927,514 $1,291,456
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.17%(c) 2.04% 1.92% 1.78% 1.82%
-------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.17%(c) 2.04% 1.93% 1.82% 1.87%
===============================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.38)%(c) (1.34)% (1.27)% (1.20)% (1.17)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 111% 217% 240% 145% 124%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $524,617,004.
FS-91
AIM
WEINGARTEN FUND
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.83 $ 11.87 $ 26.85 $ 27.30 $ 21.14
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14) (0.15)(a) (0.21) (0.36)(a) (0.30)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.03 (2.89) (11.23) 3.10 7.92
===============================================================================================================================
Total from investment operations 1.89 (3.04) (11.44) 2.74 7.62
===============================================================================================================================
Less distributions from net realized gains -- -- (3.54) (3.19) (1.46)
===============================================================================================================================
Net asset value, end of period $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 21.40% (25.61)% (47.77)% 9.83% 37.50%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $91,325 $86,455 $150,604 $301,590 $105,420
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.17%(c) 2.04% 1.92% 1.78% 1.82%
-------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.17%(c) 2.04% 1.93% 1.82% 1.87%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.38)%(c) (1.34)% (1.27)% (1.20)% (1.17)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 111% 217% 240% 145% 124%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $85,257,460.
CLASS R
---------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.47 $ 11.36
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.03)(a)
-----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.15 (1.86)
===============================================================================================
Total from investment operations 2.09 (1.89)
===============================================================================================
Net asset value, end of period $11.56 $ 9.47
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 22.07% (16.64)%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 311 $ 76
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets: 1.67%(c) 1.53%(d)
_______________________________________________________________________________________________
===============================================================================================
Ratio of net investment income (loss) to average net assets (0.88)%(c) (0.84)%(d)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(e) 111% 217%
_______________________________________________________________________________________________
===============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $184,086.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-92
AIM
WEINGARTEN FUND
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.91 $ 13.16 $ 29.00 $ 28.96 $ 22.18
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00 (0.01)(a) (0.01) (0.06)(a) 0.02
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.29 (3.24) (12.29) 3.29 8.32
============================================================================================================================
Total from investment operations 2.29 (3.25) (12.30) 3.23 8.34
============================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.10)
----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (3.54) (3.19) (1.46)
============================================================================================================================
Total distributions -- -- (3.54) (3.19) (1.56)
============================================================================================================================
Net asset value, end of period $12.20 $ 9.91 $ 13.16 $ 29.00 $ 28.96
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 23.11% (24.70)% (47.11)% 11.07% 39.20%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,213 $ 1,883 $ 7,667 $18,634 $114,076
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.78%(c) 0.82% 0.69% 0.64% 0.63%
----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.78%(c) 0.82% 0.70% 0.68% 0.68%
============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.01%(c) (0.12)% (0.04)% (0.04)% 0.02%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 111% 217% 240% 145% 124%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America.
(c) Ratios are based on average daily net assets of $1,901,891.
NOTE 13--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
FS-93
NOTE 13--SUBSEQUENT EVENTS (CONTINUED)
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-94
PART C
OTHER INFORMATION
Item 23. Exhibits
a (1) - (a) Amended and Restated Agreement and Declaration of
Trust of Registrant, dated May 15, 2002.(18)
- (b) Amendment No. 1 dated June 11, 2002, to the
Amended and Restated Agreement and Declaration of
Trust of Registrant, dated May 15, 2002.(19)
- (c) Amendment No. 2 dated February 6, 2003, to the
Amended and Restated Agreement and Declaration of
Trust of Registrant, dated May 15, 2002, as amended
June 11, 2002.(21)
- (d) Amendment No. 3, dated May 14, 2003, to the
Amended and Restated Agreement and Declaration of
Trust, dated May 15, 2002.(23)
- (e) Amendment No. 4 dated June 11, 2003, to the
Amended and Restated Agreement and Declaration of
Trust of Registrant, dated May 15, 2002.(24)
- (f) Amendment No. 5 dated December 10, 2003, to the
Amended and Restated Agreement and Declaration of
Trust of Registrant, dated May 15, 2002.(24)
b (1) - Amended and Restated By-Laws of Registrant, adopted
effective May 15, 2002.(18)
(2) - First Amendment adopted effective November 6, 2003,
to the Amended and Restated By-Laws of Registrant,
adopted effective May 15, 2002.(25)
c - Articles II, VI, VII, VIII and IX of the Amended and
Restated Agreement Declaration of Trust, as amended,
and Articles IV, V and VI of the Amended and Restated
By-Laws define rights of holders of shares.
d (1) - (a) Master Investment Advisory Agreement, dated June
21, 2000, between Registrant and A I M Advisors,
Inc.(13)
- (b) Amendment No. 1, dated December 28, 2001, to
Master Investment Advisory Agreement, dated June 21,
2000, between Registrant and A I M Advisors, Inc.(17)
- (c) Amendment No. 2, dated August 29, 2002, to Master
Investment Advisory Agreement, dated June 21, 2000,
between Registrant and A I M Advisors, Inc.(21)
- (d) Amendment No. 3, dated May 2, 2003 to Master
Investment Advisory Agreement, dated June 21, 2000,
between Registrant and A I M Advisors, Inc.(23)
(2) - Master Sub-Advisory Agreement, dated June 21, 2000,
between A I M Advisors, Inc. and A I M Capital
Management, Inc.(13)
C-1
|
(3) - Sub-Advisory Agreement, dated June 21, 2000, between
A I M Advisors, Inc. and H.S. Dent Advisors, Inc.(13)
e (1) - (a) First Amended and Restated Master Distribution
Agreement, dated July 1, 2000 between Registrant (on
behalf of its Class A and Class C shares) and A I M
Distributors, Inc.(13)
- (b) Amendment No. 1, dated November 28, 2000, to the
First Amended and Restated Master Distribution
Agreement dated July 1, 2000, between Registrant (on
behalf of its Class A and Class C shares) and A I M
Distributors, Inc.(13)
- (c) Amendment No. 2, dated December 28, 2001, to the
First Amended and Restated Master Distribution
Agreement, dated July 1, 2000, between Registrant (on
behalf of its Class A and Class C shares) and A I M
Distributors, Inc.(17)
- (d) Amendment No. 3, dated March 15, 2002, to the
First Amended and Restated Master Distribution
Agreement, dated July 1, 2000, between Registrant (on
behalf of its Class A, Class C and Institutional
Class shares) and A I M Distributors, Inc.( 18)
- (e) Amendment No. 4, dated June 3, 2002, to the First
Amended and Restated Master Distribution Agreement,
dated July 1, 2000, between Registrant (on behalf of
its Class A, Class C and Institutional Class shares)
and A I M Distributors, Inc.(19)
- (f) Amendment No. 5, dated August 29, 2002, to the
First Amended and Restated Master Distribution
Agreement, dated July 1, 2000, between Registrant (on
behalf of its Class A, Class C, Class R and
Institutional Class shares) and A I M Distributors,
Inc.(21)
- (g) Amendment No. 6, dated May 2, 2003, to the First
Amended and Restated Master Distribution Agreement,
dated July 1, 2000, between Registrant (on behalf of
its Class A, Class C, Class R and Institutional Class
shares) and A I M Distributors, Inc.(23)
(h) Amendment No. 7, dated July 21, 2003, to the
First Amended and Restated Master Distribution
Agreement, dated July 1, 2000, between Registrant (on
behalf of its Class A, Class C, Class R and
Institutional Class Shares) and A I M Distributors,
Inc.(24)
(2) - (a) Amended and Restated Master Distribution
Agreement, dated as of August 18, 2003, between
Registrant (all classes of shares except Class B
shares) and A I M Distributors, Inc.(24)
- (b) Amendment No. 1 to the Amended and Restated
Master Distribution Agreement, dated as of October
29, 2003, between Registrant (all classes of shares
except Class B shares) and A I M Distributors,
Inc.(24)
- (c) Amendment No. 2 to the Amended and Restated
Master Distribution Agreement, dated as of November
4, 2003, between Registrant (all classes of shares
except Class B shares) and A I M Distributors,
Inc.(24)
C-2
|
- (d) Amendment No. 3 to the Amended and Restated
Master Distribution Agreement, dated as of November
20, 2003, between Registrant (all classes of shares
except Class B shares) and A I M Distributors,
Inc.(24)
- (e) Amendment No. 4 to the Amended and Restated
Master Distribution Agreement, dated as of November
24, 2003, between Registrant (all classes of shares
except Class B shares) and A I M Distributors,
Inc.(24)
- (f) Amendment No. 5 to the Amended and Restated
Master Distribution Agreement, dated as of November
25, 2003, between Registrant (all classes of shares
except Class B shares) and A I M Distributors,
Inc.(24)
- (g) Form of Amendment No. 6 to the Amended and
Restated Master Distribution Agreement, dated as
of , 2004, between Registrant (all classes
of shares except Class B shares) and A I M
Distributors, Inc. to be filed by Post-Effective
Amendment.
- (h) Form of Amendment No. 7 to the Amended and
Restated Master Distribution Agreement dated as
of , 2004, between Registrant (all classes
of shares except Class B shares) and A I M
Distributors, Inc.(21)
(3) - (a) Amended and Restated Master Distribution
Agreement, dated as of August 18, 2003, between
Registrant (Class B shares) and A I M Distributors,
Inc.(24)
- (b) Amendment No. 1 to the Amended and Restated
Master Distribution Agreement, dated as of October 1,
2003, between Registrant (Class B shares) and A I M
Distributors, Inc.(24)
- (c) Amendment No. 2 to the Amended and Restated
Master Distribution Agreement, dated as of October
29, 2003, between Registrant (Class B shares) and A I
M Distributors, Inc.(24)
- (d) Amendment No. 3 to the Amended and Restated
Master Distribution Agreement, dated as of November
3, 2003, between Registrant (Class B shares) and A I
M Distributors, Inc.(24)
- (e) Amendment No. 4 to the Amended and Restated
Master Distribution Agreement, dated as of November
4, 2003, between Registrant (Class B shares) and A I
M Distributors, Inc.(24)
- (f) Amendment No. 5 to the Amended and Restated
Master Distribution Agreement, dated as of November
20, 2003, between Registrant (Class B shares) and A I
M Distributors, Inc.(24)
- (g) Amendment No. 6 to the Amended and Restated
Master Distribution Agreement, dated as of November
24, 2003, between Registrant (Class B shares) and A I
M Distributors, Inc.(24)
- (h) Amendment No. 7 to the Amended and Restated
Master Distribution Agreement, dated as of November
25, 2003, between Registrant (Class B shares) and A I
M Distributors, Inc.(24)
(4) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers.(14)
(5) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks.(6)
f (1) - AIM Funds Retirement Plan for Eligible
Directors/Trustees, as restated October 1, 2001.(16)
(2) - Form of AIM Funds Director Deferred Compensation
Agreement as amended March 7, 2000, September 28,
2001, and September 26, 2002.(21)
|
g (1) - (a) Master Custodian Contract, dated May 1, 2000,
between Registrant and State Street Bank and Trust
Company.(13)
- (b) Amendment, dated May 1, 2000 to the Custodian
Contract, dated May 1, 2000, between Registrant and
State Street Bank and Trust Company.(13)
- (c) Amendment, dated June 29, 2001, to the Master
Custodian Contract, dated May 1, 2000, between
Registrant and State Street Bank and Trust
Company.(16)
- (d) Amendment, dated April 2, 2002, to the Custodian
Contract dated May 1, 2002 between Registrant and
State Street Bank and Trust Company.(18)
(2) - (a) Subcustodian Agreement, dated September 9, 1994,
between Registrant, Texas Commerce Bank National
Association, State Street Bank and Trust Company and
A I M Fund Services, Inc. (now known as AIM
Investment Services, Inc.)(2)
- (b) Amendment No. 1, dated October 2, 1998, to
Subcustodian Agreement between Registrant, Chase Bank
of Texas, N.A. (formerly Texas Commerce Bank), State
Street and Trust Company and A I M Fund Services,
Inc. (now known as AIM Investment Services, Inc.)(10)
(c) Amendment No. 2, dated March 15, 2002, to the
Subcustodian Agreement, dated September 9, 1994, as
amended October 2, 1998 among JPMorgan Chase Bank
(formerly known as Chase Bank of Texas, N.A.), State
Street Bank and Trust Company and A I M Fund
Services, Inc. (now known as AIM Investment Services,
Inc.)(22)
(3) Subcustodian Agreement, dated January 20, 1993,
between State Street Bank and Trust Company and The
Bank of New York(24)
(4) - Foreign Assets Delegation Agreement, dated May 31,
2002, between A I M Advisors, Inc. and
Registrant.(16)
h (1) - (a) Transfer Agency and Service Agreement, dated June
21, 2000, between Registrant and A I M Fund Services,
Inc. (now known as AIM Investment Services, Inc.)(13)
- (b) Amendment No. 1, dated July 1, 2000, to the
Transfer Agency and Service Agreement dated June 21,
2000, between Registrant and A I M Fund Services,
Inc., (now known as AIM Investment Services,
Inc.)(13)
- (c) Amendment No. 2, dated January 1, 2002, to the
Transfer Agency and Services Agreement dated June 21,
2000, between Registrant and A I M Fund Services,
Inc., (now known as AIM Investment Services,
Inc.)(17)
- (d) Amendment No. 3, dated March 4, 2002, to the
Transfer Agency and Services Agreement dated June 21,
2000, between Registrant and A I M Fund Services,
Inc., (now known as AIM Investment Services,
Inc.)(18)
- (e) Amendment No. 4, dated May 14, 2003, to the
Transfer Agency and Service Agreement, dated June 21,
2000, between Registrant and A I M Fund Services,
Inc., (now known as AIM Investment Services,
Inc.)(23)
C-4
|
- (f) Amendment No. 5, dated June 11, 2003, to the
Transfer Agency and Service Agreement, dated June 21,
2000, between Registrant and A I M Fund Services,
Inc., (now known as AIM Investment Services,
Inc.)(23)
(2) - Shareholder Sub-Accounting Services Agreement between
Registrant, First Data Investor Services Group
(formerly The Shareholder Services Group, Inc.),
Financial Data Services Inc. and Merrill Lynch,
Pierce, Fenner & Smith Inc., dated October 1,
1993.(1)
(3) - (a) Master Administrative Services Agreement, dated
June 21, 2000, between Registrant and A I M Advisors,
Inc.(13)
- (b) Amendment No. 1, dated May 9, 2001, to the Master
Administrative Services Agreement, dated June 21,
2000, between Registrant and A I M Advisors, Inc.(14)
- (c) Amendment No. 2, dated December 28, 2001, to the
Master Administrative Services Agreement, dated June
21, 2000, between Registrant and A I M Advisors,
Inc.(17)
- (d) Amendment No. 3, dated August 29, 2002, to the
Master Administrative Services Agreement, dated June
21, 2000, between Registrant and A I M Advisors,
Inc.(21)
- (e) Amendment No. 4, dated May 2, 2003, to the Master
Administrative Services Agreement, dated June 21,
2000, between Registrant and A I M Advisors, Inc.(23)
(4) - (a) Memorandum of Agreement, regarding securities
lending, dated June 21, 2000, between Registrant, on
behalf of all Funds, and A I M Advisors, Inc.(13)
(b) Memorandum of Agreement, dated July 1, 2003,
between Registrant, on behalf of AIM Diversified
Dividend Fund, and A I M Advisors, Inc.(23)
- (c) Memorandum of Agreement, dated July 1, 2003,
between Registrant, on behalf of each Fund's
Institutional Class, and A I M Fund Services,
Inc.(23)
(5) - Interfund Loan Agreement, dated September 18, 2001,
between all Registrant and A I M Advisors, Inc.(14)
(6) - Expense Reimbursement Agreement Related to DST
Transfer Agent System Conversion dated June 30,
2003.(25)
|
i - Opinion and consent of Ballard Spahr Andrews & Ingersoll LLP.(25)
j - Consent of Ernst & Young LLP.(25)
k
- Omitted Financial Statements - None.
l (1) - Agreement Concerning Initial Capitalization of
Registrant's AIM Large Cap Growth Fund, dated
February 26, 1999.(7)
C-5
|
(2) - Agreement Concerning Initial Capitalization of
Registrant's AIM Dent Demographic Trends Fund, dated
June 4, 1999.(9)
(3) - Agreement Concerning Initial Capitalization of
Registrant's AIM Large Cap Basic Value Fund, dated
June 29, 1999.(9)
(4) - Agreement Concerning Initial Capitalization of
Registrant's AIM Mid Cap Growth Fund, dated November
1, 1999.(10)
(5) - Agreement Concerning Initial Capitalization of
Registrant's AIM Emerging Growth Fund, dated March
30, 2001.(13)
(6) - Agreement concerning Initial Capitalization of
Registrant's AIM Core Strategies Fund and AIM Large
Cap Core Equity Fund, dated December 28, 2001.(17)
(7) - Agreement concerning Initial Capitalization of
Registrant's AIM Basic Value II Fund and AIM U.S.
Growth Fund, dated August 28, 2002.(21)
m (1) - Third Amended and Restated Master Distribution Plan,
dated as of July 21, 2003, for the Class A, Class C,
Class R and Investor Class Shares. (24)
(2) - (a) Amended and Restated Master Distribution Plan
dated as of August 18, 2003, between Registrant
(Class A Shares) and A I M Distributors, Inc.(24)
- (b) Amendment No. 1, dated October 29, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class A Shares) and A I M Distributors,
Inc.(24)
- (c) Amendment No. 2, dated November 4, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class A Shares) and A I M Distributors,
Inc.(24)
- (d) Amendment No. 3, dated November 20, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class A Shares) and A I M Distributors,
Inc.(24)
- (e) Amendment No. 4, dated November 24, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class A Shares) and A I M Distributors,
Inc.(24)
- (f) Amendment No. 5, dated November 25, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class A Shares) and A I M Distributors,
Inc.(24)
(3) - (a) Amended and Restated Master Distribution Plan
dated as of August 18, 2003, between Registrant
(Class B Shares) and A I M Distributors, Inc.(24)
- (b) Amendment No. 1, dated October 29, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class B Shares) and A I M Distributors,
Inc.(24)
- (c) Amendment No. 2, dated November 4, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class B Shares) and A I M Distributors,
Inc.(24)
C-6
|
- (d) Amendment No. 3, dated November 20, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class B Shares) and A I M Distributors,
Inc.(24)
- (e) Amendment No. 4, dated November 24, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class B Shares) and A I M Distributors,
Inc.(24)
- (f) Amendment No. 5, dated November 25, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class B Shares) and A I M Distributors,
Inc.(24)
(4) - (a) Amended and Restated Master Distribution Plan
dated as of August 18, 2003, between Registrant
(Class C Shares) and A I M Distributors, Inc.(24)
- (b) Amendment No. 1, dated October 29, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class C Shares) and A I M Distributors,
Inc.(24)
- (c) Amendment No. 2, dated November 4, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class C Shares) and A I M Distributors,
Inc.( 24)
- (d) Amendment No. 3, dated November 20, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class C Shares) and A I M Distributors,
Inc.(24)
- (e) Amendment No. 4, dated November 24, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class C Shares) and A I M Distributors,
Inc.(24)
- (f) Amendment No. 5, dated November 25, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class C Shares) and A I M Distributors,
Inc.(24)
(5) - (a) Amended and Restated Master Distribution Plan
dated as of August 18, 2003, between Registrant
(Class R Shares) and A I M Distributors, Inc.(24)
- (b) Amendment No. 1, dated November 4, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class R Shares) and A I M Distributors,
Inc.(24)
- (c) Amendment No. 2, dated November 24, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class R Shares) and A I M Distributors,
Inc.(24)
- (d) Amendment No. 3, dated November 25, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Class R Shares) and A I M Distributors,
Inc.(24)
(6) - (a) Amended and Restated Master Distribution Plan
dated as of August 18, 2003, between Registrant
(Investor Class Shares) and A I M Distributors,
Inc.(24)
C-7
|
- (b) Amendment No. 1, dated October 29, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Investor Class Shares) and A I M
Distributors, Inc.(24)
(c) Amendment No. 2, dated November 25, 2003, to the
Amended and Restated Master Distribution Plan between
Registrant (Investor Class Shares) and A I M
Distributors, Inc.(24)
(7) - Form of Master Related Agreement to Amended and
Restated Master Distribution Plan (Class A
Shares).(24)
(8) - Form of Master Related Agreement to Amended and
Restated Master Distribution Plan (Class C
Shares).(24)
(9) - Form of Master Related Agreement to Amended and
Restated Master Distribution Plan (Class R
Shares).(24)
(10) - Form of Master Related Agreement to Amended and
Restated Master Distribution Plan (Investor Class
Shares)(24)
n - Fourth Amended and Restated Multiple Class Plan of
The AIM Family of Funds --Registered Trademark--,
effective December 12, 2001 as amended and restated
March 4, 2002, as amended and restated October 31,
2002 as further amended and restated effective July
21, 2003 and as further amended and restated
effective August 18, 2003.(24)
- - Reserved
p (1) - The A I M Management Group Code of Ethics, adopted
May 1, 1981, as last amended June 10, 2003, relating
to A I M Management Group Inc. and A I M Advisors,
Inc. and its wholly owned and indirect
subsidiaries.(23)
(2) - AIM Funds Code of Ethics of the Registrant, effective
September 23, 2000.(14)
(3) - H. S. Dent Advisors, Inc.- Code of Ethics, dated May
1, 1999, on behalf of AIM Dent Demographic Trends
Fund of Registrant.(19)
|
(1) Incorporated herein by reference to PEA No. 40, filed on
February 26, 1992.
(2) Incorporated herein by reference to PEA No. 44, filed on
February 24, 1995.
(3) Incorporated herein by reference to PEA No. 47, filed on
December 29, 1995.
(4) Incorporated herein by reference to PEA No. 53, filed on
October 8, 1997.
(5) Incorporated herein by reference to PEA No. 54, filed on
February 27, 1998.
(6) Incorporated herein by reference to PEA No. 55, filed on
December 11, 1998.
(7) Incorporated herein by reference to PEA No. 56, filed on
February 23, 1999.
(8) Incorporated herein by reference to PEA No. 57, filed on March
24, 1999.
(9) Incorporated herein by reference to PEA No. 60, filed on July
15, 1999.
(10) Incorporated herein by reference to PEA No. 62, filed on
January 6, 2000.
(11) Incorporated herein by reference to PEA No. 64, filed on March
27, 2000.
(12) Incorporated herein by reference to PEA No. 65, filed on May
25, 2000.
(13) Incorporated herein by reference to PEA No. 67, filed on
February 23, 2001.
(14) Incorporated herein by reference to PEA No. 68, filed on
October 12, 2001.
(15) Incorporated herein by reference to PEA No. 69, filed on
December 14, 2001.
(16) Incorporated herein by reference to PEA No. 70, filed on
December 28, 2001.
(17) Incorporated herein by reference to PEA No. 71, filed on April
26, 2002.
(18) Incorporated herein by reference to PEA No. 72, filed on May
22, 2002.
(19) Incorporated herein by reference to PEA No. 73, filed on June
13, 2002.
(20) Incorporated herein by reference to PEA No. 74, filed on
August 28, 2002.
(21) Incorporated herein by reference to PEA No. 75, filed on
February 24, 2003.
(22) Incorporated herein by reference to PEA No. 76, filed on March
3, 2003.
(23) Incorporated herein by reference to PEA No. 77, filed on July
7, 2003.
(24) Incorporated herein by reference to PEA No. 78, filed on
February 24, 2003.
(25) Filed herewith electronically
Item 24. Persons Controlled by or Under Common Control With the Fund
None.
Item 25. Indemnification
The Registrant's Amended and Restated Agreement and
Declaration of Trust, dated May 15, 2002, as amended,
provides, among other things (i) that trustees and officers of
the Registrant, when acting as such, shall not be personally
liable for any act, omission or obligation of the Registrant
or any trustee or officer (except for liabilities to the
Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
to duty); (ii) for the indemnification by the Registrant of
the trustees, officers, employees and agents of the Registrant
to the fullest extent permitted by the Delaware Statutory
Trust Act and Bylaws and other applicable law; (iii) that
shareholders of the Registrant shall not be personally liable
for the debts, liabilities, obligations or expenses of the
Registrant or any portfolio or class; and (iv) for the
indemnification by the Registrant, out of the assets belonging
to the applicable portfolio, of shareholders and former
shareholders of the Registrant in case they are held
personally liable solely by reason of being or having been
shareholders of the Registrant or any portfolio or class and
not because of their acts or omissions or for some other
reason.
A I M Advisors, Inc. ("AIM"), the Registrant and other
investment companies managed by AIM, their respective
officers, trustees, directors and employees (the "Insured
Parties") are insured under a joint Mutual Fund & Investment
Advisory Professional and Directors & Officers Liability
Policy, issued by ICI Mutual Insurance Company, with a
$35,000,000 limit of liability.
C-9
|
Section 16 of the Master Investment Advisory Agreement between
the Registrant and AIM provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard
of obligations or duties hereunder on the part of AIM or any
of its officers, directors or employees, that AIM shall not be
subject to liability to the Registrant or to any series of the
Registrant, or to any shareholder of any series of the
Registrant for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any
security. Any liability of AIM to any series of the Registrant
shall not automatically impart liability on the part of AIM to
any other series of the Registrant. No series of the
Registrant shall be liable for the obligations of any other
series of the Registrant.
Section 10 of the Sub-Advisory Agreement between AIM and A I M
Capital Management Inc. and Section 11 of the Sub-Advisory
Agreement between AIM and H.S. Dent Advisors, Inc.,
(collectively, the "Sub-Advisory Agreements") provide that the
Sub-advisors shall not be liable for any costs or liabilities
arising from any error of judgment or mistake of law or any
loss suffered by any series of the Registrant or the
Registrant in connection with the matters to which the
Sub-Advisory Agreements relate except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part
of the Sub-advisors in the performance by the Sub-advisors of
their duties or from reckless disregard by the Sub-advisors of
their obligations and duties under the Sub-Advisory
Agreements.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such trustees, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Investment Advisor
The only employment of a substantial nature of the Advisor's
directors and officers is with the Advisor and its affiliated
companies. For information as to the business profession,
vocation or employment of a substantial nature of each of the
officers and directors of H.S. Dent Advisors, Inc. reference
is made to Form ADV filed under the Investment Advisers Act of
1940 by H.S. Dent Advisors, Inc. herein incorporated by
reference. Reference is also made to the caption "Fund
Management - The Advisor" in the Prospectus which comprises
Part A of the Registration Statement, and to the caption
"Investment Advisory and Other Services" of the Statement of
Additional Information which comprises Part B of the
Registration Statement, and to Item 27(b) of this Part C.
C-10
|
Item 27. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal
underwriter, also acts as a principal underwriter to the
following investment companies:
AIM Combination Stock & Bond Funds
AIM Counselor Series Trust
AIM Floating Rate Fund
AIM Funds Group
AIM Growth Series
AIM International Mutual Funds
AIM Investment Funds
AIM Investment Securities Funds
AIM Sector Funds
AIM Special Opportunities Funds
AIM Stock Funds
AIM Summit Fund
AIM Tax-Exempt Funds
AIM Variable Insurance Funds
|
(b)
Name and Principal Position and Offices with Positions and Offices
Business Address* Underwriter with Registrant
----------------- ----------- ---------------
Gene L. Needles Chairman, Director, President & Chief None
Executive Officer
Mark H. Williamson Director Trustee & Executive
Vice President
John S. Cooper Executive Vice President None
James L. Salners Executive Vice President None
Marilyn M. Miller Executive Vice President None
James E. Stueve Executive Vice President None
Raymond R. Cunningham Senior Vice President None
Glenda A. Dayton Senior Vice President None
Gary K. Wendler Senior Vice President None
Stephen H. Bitteker First Vice President None
Kevin M. Carome Vice President Senior Vice President
and Chief Legal Officer
Mary A. Corcoran Vice President None
Sidney M. Dilgren Vice President Vice President &
Treasurer
|
Name and Principal Position and Offices with Positions and Offices
Business Address* Underwriter with Registrant
----------------- ----------- ---------------
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Kim T. McAuliffe Vice President None
Linda L. Warriner Vice President None
Rebecca Starling-Klatt Chief Compliance Officer & Assistant Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
|
-----------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) None.
Item 28. Location of Accounts and Records
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173, will maintain physical possession of each
such account, book or other document of the Registrant at its
principal executive offices, except for those maintained by
the Registrant's Custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110, and
the Registrant's Transfer Agent and Dividend Paying Agent, AIM
Investment Services, Inc. (formerly known as A I M Fund
Services, Inc.), P.O. Box 4739, Houston, Texas 77210-4739.
Item 29. Management Services
None.
Item 30. Undertakings
Not applicable.
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Houston, Texas on the 1st day of March, 2004.
REGISTRANT: AIM EQUITY FUNDS
By: /s/ Robert H. Graham
----------------------------
Robert H. Graham, President
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Robert H. Graham Chairman, Trustee & President March 1, 2004
------------------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ Bob R. Baker* Trustee March 1, 2004
-------------------------------------
(Bob R. Baker)
/s/ Frank S. Bayley* Trustee March 1, 2004
-------------------------------------
(Frank S. Bayley)
/s/ James T. Bunch* Trustee March 1, 2004
-------------------------------------
(James T. Bunch)
/s/ Bruce L. Crockett* Trustee March 1, 2004
-------------------------------------
(Bruce L. Crockett)
/s/ Albert R. Dowden* Trustee March 1, 2004
-------------------------------------
(Albert R. Dowden)
/s/ Edward K. Dunn, Jr.* Trustee March 1, 2004
-------------------------------------
(Edward K. Dunn, Jr.)
/s/ Jack M. Fields* Trustee March 1, 2004
-------------------------------------
(Jack M. Fields)
/s/ Carl Frischling* Trustee March 1, 2004
-------------------------------------
(Carl Frischling)
/s/ Gerald J. Lewis* Trustee March 1, 2004
-------------------------------------
(Gerald J. Lewis)
/s/ Prema Mathai-Davis* Trustee March 1, 2004
-------------------------------------
(Prema Mathai-Davis)
/s/ Lewis F. Pennock* Trustee March 1, 2004
-------------------------------------
(Lewis F. Pennock)
/s/ Ruth H. Quigley* Trustee March 1, 2004
-------------------------------------
(Ruth H. Quigley)
|
/s/ Louis S. Sklar* Trustee March 1, 2004
-------------------------------------
(Louis S. Sklar)
/s/ Larry Soll* Trustee March 1, 2004
-------------------------------------
(Larry Soll)
/s/ Mark H. Williamson* Trustee & March 1, 2004
------------------------------------- Executive Vice President
(Mark H. Williamson)
/s/ Sidney M. Dilgren Vice President & Treasurer March 1, 2004
------------------------------------- (Principal Financial and
(Sidney M. Dilgren) Accounting Officer)
*By /s/ Robert H. Graham
-------------------------------------
Robert H. Graham
Attorney-in-Fact
|
* Original Powers of Attorney authorizing Robert H. Graham and Kevin M. Carome, and each of them, to execute this Registration Statement of the Registrant on behalf of the above-named trustees and officers of the Registrant (with the exception of Bob R. Baker, James T. Bunch, Gerald J. Lewis and Larry Soll) have been filed with the Securities and Exchange Commission with the Registration Statement of AIM Variable Insurance Funds on Form N-14 on December 31, 2003 and original Powers of Attorney for Bob R. Baker, James T. Bunch, Gerald J. Lewis and Larry Soll have been filed with the Securities and Exchange Commission with the Registration Statement of INVESCO Variable Investment Funds, Inc. on Form N-14 on December 31, 2003 and hereby are incorporated by reference.
INDEX
Exhibit Number Description
b(2) First Amendment adopted effective November 6, 2003,
to the Amended and Restated By-Laws of Registrant,
adopted effective May 15, 2002
e(1)(h) Form of Amendment No. 7 to the Amended and Restated
Master Distribution Agreement dated of as ,
2004, between Registrant (all classes of shares
except Class B shares) and A I M Distributors, Inc.
h(6) Expense Reimbursement Agreement Related to DST
Transfer Agent System Conversion dated June 30, 2003
i Opinion and consent of Ballard Spahr Andrews &
Ingersoll LLP
j Consent of Ernst & Young LLP
|
EXHIBIT b(2)
FIRST AMENDMENT TO
BYLAWS OF AIM EQUITY FUNDS
(A DELAWARE STATUTORY TRUST)
ADOPTED NOVEMBER 6, 2003
The Bylaws of AIM Equity Funds are hereby amended as follows:
WHEREAS, the Board of Trustees has determined that it is in the best interests of AIM Equity Funds that the following amendment be made to the Bylaws of AIM Equity Funds;
NOW THEREFORE BE IT RESOLVED, that Article II, Section 5(a), of the Bylaws of AIM Equity Funds is hereby amended to read in its entirety as follows:
Section 5. Designation, Powers, and Names of Committees.
(a) The Board of Trustees shall initially have the following four committees: (1) an Audit Committee; (2) a Governance Committee; (3) an Investments Committee; and (4) a Valuation Committee. Each such Committee, except for the Governance Committee, shall consist of two or more of the Trustees of the Trust and the Governance Committee shall consist of one or more of the Trustees of the Trust, and the Board may designate one or more Trustees as alternate members of any Committee, who may replace any absent or disqualified member at any meeting of such Committee; provided, however, that under no circumstances shall a member of the Audit Committee or the Governance Committee be an "interested person," as such term is defined in the 1940 Act, of the Trust. The Board shall designate the powers and duties of each such Committee and may terminate any such Committee by an amendment to these Bylaws.
EXHIBIT e(1)(h)
AMENDMENT NO. 7
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(ALL CLASSES OF SHARES EXCEPT CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (all Classes of shares except Class B Shares) (the "Agreement") made as of the 18th day of August, 2003, by and between each registered investment company set forth on Schedule A to the Agreement (each individually referred to as "Fund", or collectively, "Funds"), severally, on behalf of each of its series of common stock or beneficial interest, as the case may be, set forth on Schedule A to the Agreement, (each, a "Portfolio"), with respect to each class of shares except Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor") is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(ALL CLASSES OF SHARES EXCEPT CLASS B SHARES)
AIM COMBINATION STOCK & BOND FUNDS
INVESCO Core Equity Fund - Class A
Class C
Class K
Investor Class
INVESCO Total Return Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM COUNSELOR SERIES TRUST
INVESCO Advantage Health Sciences Fund - Class A
Class C
INVESCO Multi-Sector Fund - Class A
Class C
Institutional Class
AIM EQUITY FUNDS
AIM Aggressive Growth Fund - Class A
Class C
Class R
Institutional Class
|
AIM Basic Value II Fund - Class A
Class C
AIM Blue Chip Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Capital Development Fund - Class A
Class C
Class R
Institutional Class
AIM Charter Fund - Class A
Class C
Class R
Institutional Class
AIM Constellation Fund - Class A
Class C
Class R
Institutional Class
AIM Core Strategies Fund - Class A
Class C
AIM Dent Demographic Trends Fund - Class A
Class C
AIM Diversified Dividend Fund - Class A
Class C
AIM Emerging Growth Fund - Class A
Class C
AIM Large Cap Basic Value Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Large Cap Growth Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Mid Cap Growth Fund - Class A
Class C
Class R
Institutional Class
|
AIM U.S. Growth Fund - Class A
Class C
AIM Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Balanced Fund - Class A
Class C
Class R
Institutional Class
AIM Basic Balanced Fund - Class A
Class C
Class R
Institutional Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
AIM International Emerging Growth Fund - Class A
Class C
AIM Mid Cap Basic Value Fund - Class A
Class C
Class R
Institutional Class
AIM Premier Equity Fund - Class A
Class C
Class R
Institutional Class
AIM Select Equity Fund - Class A
Class C
AIM Small Cap Equity Fund - Class A
Class C
Class R
AIM GROWTH SERIES
AIM Aggressive Allocation Fund - Class A
Class C
Class R
Institutional Class
|
AIM Basic Value Fund - Class A
Class C
Class R
Institutional Class
AIM Conservative Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Global Equity Fund - Class A
Class C
Institutional Class
AIM Mid Cap Core Equity Fund - Class A
Class C
Class R
Institutional Class
AIM Moderate Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Small Cap Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INTERNATIONAL MUTUAL FUNDS
AIM Asia Pacific Growth Fund - Class A
Class C
AIM European Growth Fund - Class A
Class C
Class R
Investor Class
AIM Global Aggressive Growth Fund - Class A
Class C
AIM Global Growth Fund - Class A
Class C
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
|
INVESCO International Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
AIM Global Health Care Fund - Class A
Class C
AIM Libra Fund - Class A
Class C
AIM Trimark Endeavor Fund - Class A
Class C
Class R
Institutional Class
AIM Trimark Fund - Class A
Class C
Class R
Institutional Class
AIM Trimark Small Companies Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund - Class A
Class C
Institutional Class
Investor Class
AIM Income Fund - Class A
Class C
Class R
Investor Class
AIM Intermediate Government Fund - Class A
Class C
Class R
Investor Class
AIM Limited Maturity Treasury Fund - Class A
Class A3
Institutional Class
|
AIM Money Market Fund - AIM Cash Reserve Shares
Class C
Class R
Institutional Class
Investor Class
AIM Municipal Bond Fund - Class A
Class C
Investor Class
AIM Real Estate Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Short Term Bond Fund - Class A
Class C
Class R
Institutional Class
AIM Total Return Bond Fund - Class A
Class C
Class R
Institutional Class
AIM SECTOR FUNDS
INVESCO Energy Fund - Class A
Class C
Class K
Investor Class
INVESCO Financial Services Fund - Class A
Class C
Class K
Investor Class
INVESCO Gold & Precious Metals Fund - Class A
Class C
Investor Class
INVESCO Health Science Fund - Class A
Class C
Class K
Investor Class
INVESCO Leisure Fund - Class A
Class C
Class K
Investor Class
|
INVESCO Technology Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Utilities Fund - Class A
Class C
Investor Class
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund - Class A
Class C
AIM Opportunities II Fund - Class A
Class C
AIM Opportunities III Fund - Class A
Class C
AIM STOCK FUNDS
INVESCO Dynamics Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Mid-Cap Growth Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Small Company Growth Fund - Class A
Class C
Class K
Investor Class
INVESCO S&P 500 Index Fund - Institutional Class
Investor Class
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund - Class A
Class C
AIM Tax-Exempt Cash Fund - Class A
Investor Class
AIM Tax-Free Intermediate Fund - Class A
Class A3
|
AIM TREASURER'S SERIES TRUST
INVESCO Stable Value Fund - Class R
Institutional Class
INVESCO U.S. Government Money Fund - Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: April 30, 2004
EACH FUND (LISTED ON SCHEDULE
A) ON BEHALF OF THE SHARES OF EACH PORTFOLIO LISTED ON SCHEDULE A
A I M DISTRIBUTORS, INC.
EXHIBIT h(6)
EXPENSE REIMBURSEMENT AGREEMENT
RELATED TO DST TRANSFER AGENT SYSTEM CONVERSION
This Expense Reimbursement Agreement (this "Agreement") is made as of the 30th day of June 2003, by and between A I M Fund Services, Inc. ("AFS"), and each of the mutual funds on behalf of each of their respective portfolios listed on Exhibit A, attached hereto (each, a "Fund").
WHEREAS, AFS currently serves and has, at all relevant times, served as the transfer agent for each of the Funds, pursuant to a Transfer Agency and Service Agreement with each Fund (collectively, the "Transfer Agency Agreements"); and
WHEREAS, pursuant to the Transfer Agency Agreements, AFS has agreed to maintain and does maintain all shareholder account records and information for the Funds, and the Funds have agreed to reimburse AFS for certain costs incurred by AFS in the course of performing such services, including, but not limited to, the cost of obtaining licenses to use and the cost of usage of certain record keeping systems and related support systems owned by DST Systems, Inc., and its affiliates (collectively, "DST"); and
WHEREAS, the Funds were made aware of (i) the costs associated with the movement of shareholder account information and related books and records from systems previously used by AFS to perform such services to the DST-owned systems (the "DST system conversion"), and (ii) the cost savings and other benefits that were expected to be realized over the long term by using the DST-owned systems; and
WHEREAS, the Funds determined that it was in the best interests of their shareholders to facilitate the DST system conversion and the use the DST-owned systems by AFS to provide the services contemplated by the Transfer Agency Agreements; and
WHEREAS, the Boards of Directors/Trustees of the Funds have agreed that each of the Funds would reimburse a pro rata share of the costs of the DST system conversion; and
WHEREAS, AFS provided the Funds with periodic reports regarding the project plan and budget related to the DST system conversion, updating cost projections as the project progressed; and
WHEREAS, the DST system conversion is now complete and the final costs related to the project have been compiled;
THEREFORE, the premises considered, AFS and each of the Funds agree on behalf of the portfolios set forth on Exhibit A, severally and not jointly, as follows:
1. Each Fund agrees to reimburse AFS for a pro rata share of the expenses incurred by AFS in connection with the DST system conversion in an aggregate amount, when allocated to all portfolios of the Funds, not to exceed FOUR MILLION SIX HUNDRED FORTY-NINE THOUSAND THREE HUNDRED THIRTY FOUR AND 57/100 DOLLARS ($4,649,334.57), payable in equal installments over thirty-six (36) months. Each month, each portfolio of each Fund shall pay its pro rata portion of the reimbursement, based on each portfolios' number of open billable shareholder accounts for the preceding month. AFS shall submit an invoice to each Fund on the first business day of each month for the amount due by each portfolio. Unless this Agreement is terminated prior to the payment of an invoice, each invoice shall be due and payable by each portfolio of each Fund within thirty (30) days of receipt.
2. The Funds may terminate this Agreement with respect to any portfolio, without penalty, for cause or for convenience, upon notice to AFS.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
A I M FUND SERVICES, INC. ON BEHALF OF EACH OF THE FUNDS:
By: /s/ TONY D. GREEN /s/ KEVIN M. CAROME
------------------------------ --------------------------------
Name: Tony D. Green Name: Kevin M. Carome
Title: President Title: Senior Vice President
|
EXHIBIT A
SCHEDULE OF FUNDS
The following Funds enter into the Agreement on behalf of each of their respective portfolios:
FUND NAME PORTFOLIO NAME
--------- --------------
AIM Advisor Funds AIM International Core Equity Fund
AIM Real Estate Fund
AIM Equity Funds AIM Aggressive Growth Fund
AIM Basic Value II Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Core Strategies Fund
AIM Dent Demographic Trends Fund
AIM Emerging Growth Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Core Equity Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM U.S. Growth Fund
AIM Weingarten Fund
AIM Floating Rate Fund AIM Floating Rate Fund
AIM Funds Group AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Utilities Fund
AIM International Emerging Growth Fund
AIM Mid Cap Basic Value Fund
AIM New Technology Fund
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Worldwide Spectrum Fund
AIM Growth Series AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
AIM International Funds, Inc. AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM International Growth Fund
|
FUND NAME PORTFOLIO NAME
--------- --------------
AIM Investment Funds AIM Developing Markets Fund
AIM Global Biotech Fund
AIM Global Energy Fund
AIM Global Financial Services Fund
AIM Global Health Care Fund
AIM Global Science and Technology Fund
AIM Strategic Income Fund
AIM Investment Securities Funds AIM High Yield Fund
AIM High Yield Fund II
AIM Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Short Term Bond Fund
AIM Total Return Bond Fund
AIM Series Trust AIM Global Trends Fund
AIM Special Opportunities Funds AIM Opportunities I Fund
AIM Opportunities II Fund
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EXHIBIT i
[Letterhead of Ballard Spahr Andrews & Ingersoll, LLP]
March 1, 2004
AIM Equity Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Re: AIM Equity Funds
Registration Statement on Form N-1A
Ladies and Gentlemen:
We have acted as counsel to AIM Equity Funds, a statutory trust organized under the laws of the State of Delaware (the "Trust") and registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end, series management investment company.
This opinion is given in connection with the filing by the Trust of Post-Effective Amendment No. 79 to the Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and Amendment No. 79 to such Registration Statement under the 1940 Act (collectively, the "Registration Statement") relating to the registration of an indefinite number of Institutional Class shares of beneficial interest, par value $.001 per share (the "Shares"), of AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund and AIM Mid Cap Growth Fund, (each, a "Fund" and, collectively, the "Funds").
In connection with our giving this opinion, we have examined copies of the Trust's Certificate of Trust, Amended and Restated Agreement and Declaration of Trust, as amended (the "Trust Agreement"), and resolutions of the Board of Trustees adopted December 10, 2003 and February 12, 2004, and originals or copies, certified or otherwise identified to our satisfaction, of such other documents, records and other instruments as we have deemed necessary or advisable for purposes of this opinion. We have also examined the prospectuses for the Funds, which are included in the Registration Statement, substantially in the form in which they are to become effective (the "Prospectuses"). As to various questions of fact material to our opinion, we have relied upon information provided by officers of the Trust.
Based on the foregoing, we are of the opinion that the Shares to be offered for sale pursuant to the Prospectuses are duly authorized and, when sold, issued and paid for as described in the Prospectus for the respective Fund, will be validly issued, fully paid and nonassessable.
AIM Equity Funds
March 1, 2004
We express no opinion concerning the laws of any jurisdiction other than the federal law of the United States of America and the Delaware Statutory Trust Act.
Both the Delaware Statutory Trust Act and the Trust Agreement provide that shareholders of the Trust shall be entitled to the same limitation on personal liability as is extended under the Delaware General Corporation Law to stockholders of private corporations for profit. There is a remote possibility, however, that, under certain circumstances, shareholders of a Delaware statutory trust may be held personally liable for that trust's obligations to the extent that the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement also provides for indemnification out of property of a Fund for all loss and expense of any shareholder held personally liable for the obligations of that Fund. Therefore, the risk of any shareholder incurring financial loss beyond his investment due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the express limitation of shareholder liabilities is determined not to be effective.
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name and to the reference to our firm under the caption "Investment Advisory and Other Services - Other Service Providers - Counsel to the Trust" in the Statement of Additional Information for the Funds, which is included in the Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP |
EXHIBIT j
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Financial Highlights" in the Prospectus and "Auditors" in the Statement of Additional Information and to the use of our reports dated December 16, 2003, on the financial statements and financial highlights of the AIM Aggressive Growth Fund, AIM Basic Value II Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Core Strategies Fund, AIM Dent Demographic Trends Fund, AIM Diversified Dividend Fund, AIM Emerging Growth Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Mid Cap Growth Fund, AIM U.S. Growth Fund, and AIM Weingarten Fund as of and for the year ended October 31, 2003 in the Post-Effective Amendment Number 79 to the Registration Statement (Form N-1A No. 2-25469).
ERNST & YOUNG LLP
Houston, Texas
February 27, 2004