As filed with the Securities and Exchange Commission on September 29, 2004
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 80 X
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and/or
Amendment No. 80 X
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(Check appropriate box or boxes.)
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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)
If appropriate, check the following box:
--- this post-effective amendment designates a new effective date for a previously filed post-effective amendment.
AIM CAPITAL DEVELOPMENT FUND
PROSPECTUS
NOVEMBER 30, 2004
AIM Capital Development seeks to provide long-term growth of capital.
This prospectus contains important information about the Class A, B, C, R and Investor Class shares of the fund. Please read it before investing and keep it for future reference.
Investor Class shares offered by this prospectus are offered only to grandfathered investors. Please see the section of the prospectus entitled "Purchasing Shares--Grandfathered Investors."
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 the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 FINANCIAL HIGHLIGHTS 6 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Tools Used to Combat Excessive Short-Term Trading Activity A-4 Purchasing Shares A-5 Redeeming Shares A-6 Exchanging Shares A-10 Pricing of Shares A-12 Taxes A-13 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, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a service mark 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.
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. The fund may also invest up to 25% of its total assets in foreign securities. For cash management purposes, the fund may also 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.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If the fund does trade in this way, it may incur increased transaction costs, 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.
There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the 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. This 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.
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 fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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1997................................................................... 23.69%
1998................................................................... 4.53%
1999................................................................... 27.78%
2000................................................................... 9.82%
2001................................................................... -8.65%
2002................................................................... -21.71%
2003................................................................... 35.26%
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The Class A shares' year-to-date return as of September 30, 2004 was
[ ]%.
During the periods shown in the bar chart, the highest quarterly return was 30.92% (quarter ended December 31, 1999) and the lowest quarterly return was -21.26% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of broad-based securities market index, a style specific index and a peer group index. The fund's performance reflects payment of sales loads, if applicable. The indices do not reflect payment of fees, expenses or taxes. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below.
AVERAGE ANNUAL TOTAL RETURNS
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(for the periods
ended December 31, SINCE INCEPTION
2003) 1 YEAR 5 YEARS INCEPTION DATE
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Class A 06/17/96
Return Before Taxes 27.78% 5.11% 9.08%
Return After Taxes
on Distributions 27.31 4.14 8.41
Return After Taxes
on Distributions
and Sale of Fund
Shares 18.65 3.94 7.67
Class B 10/01/96
Return Before Taxes 29.44 5.26 7.78
Class C 08/04/97
Return Before Taxes 33.36 5.57 5.82
Class R(1) 06/17/96(1)
Return Before Taxes 34.90 6.12 9.72
Investor Class(2) 06/17/96(2)
Return Before Taxes 35.26 6.30 9.90
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S&P 500 Index(3) 28.67 (0.57) 8.64(7) 06/30/96(7)
Russell
2500--Trademark--
Index(4) 45.51 9.40 10.48(7) 06/30/96(7)
Russell Midcap
Index(5) 40.06 7.23 11.08(7) 06/30/96(7)
Lipper Mid Cap Core
Fund Index(6) 36.58 7.89 10.01(7) 06/30/96(7)
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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. After-tax returns are shown for Class A only and after-tax returns for Class B, C, R and Investor Class will vary.
(1) The returns shown for the one year period are the historical returns of the fund's Class R shares. The returns shown for the five year period and since inception are the blended returns of the historical performance of the fund's Class R shares since their inception and the restated historical performance of the fund's Class A shares (for periods prior to inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. The inception date shown in the table is that of the fund's Class A shares. The inception date of the fund's Class R shares is June 3, 2002.
(2) The returns shown for these periods are the restated historical performance of the fund's Class A shares at net asset value and reflect the higher Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in these same portfolio of securities, the Investor Class has a different expense structure. The inception date shown in the table is that of the fund's Class A shares. The inception date of the fund's Investor Class shares is December 1, 2004.
(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. The fund has elected to use the Standard & Poor's 500 Index as its broad-based index rather than the Russell 2500--Trademark-- Index because the Standard & Poor's 500 Index is a more widely recognized gauge of U.S. stock market performance. The fund has also included the Russell Midcap--Trademark-- 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.
(4) The Russell 2500--Trademark-- Index measures the performance of the 2,500 smallest companies in the Russell 3000--Registered Trademark-- Index and represents approximately 16% of the total market capitalization of the Russell 3000--Registered Trademark-- Index.
(5) The Russell Midcap--Trademark-- Index measures the performance of the 800 smallest companies in the Russell 1000--Registered Trademark-- Index. These stocks represent approximately 25% of the total market capitalization of 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.
(6) 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.
(7) The average annual total return given is since the month end closest to the inception date of the class with the longest performance history.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES --------------------------------------------------------------------------------------------- (fees paid directly from INVESTOR your investment) CLASS A CLASS B CLASS C CLASS R CLASS --------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None(3) None --------------------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(4) ------------------------------------------------------------------------------------------- (expenses that are deducted INVESTOR from fund assets) CLASS A CLASS B CLASS C CLASS R CLASS ------------------------------------------------------------------------------------------- Management Fees 0.67% 0.67% 0.67% 0.67% 0.67% Distribution and/or Service (12b-1) Fees 0.35 1.00 1.00 0.50 0.25 Other Expenses(5) 0.51 0.51 0.51 0.51 0.51 Total Annual Fund Operating Expenses 1.53 2.18 2.18 1.68 1.43 ------------------------------------------------------------------------------------------- |
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1.00% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) If you are a retirement plan participant and you bought $1,000,000 or more
of Class A shares, you may pay a 1.00% CDSC if a total redemption of the
retirement plan assets occurs within 12 months from the date of the
retirement plan's initial purchase.
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the
distributor paid a concession to the dealer of record and a total redemption
of the retirement plan assets occurs within 12 months from the date of the
retirement plan's initial purchase.
(4) There is no guarantee that actual expenses will be the same as those shown
in the table.
(5) Other expenses for Investor Class shares are based on estimated average net assets for the current fiscal year.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the 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
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Class A $697 $1,007 $1,338 $2,273
Class B 721 982 1,370 2,349
Class C 321 682 1,170 2,513
Class R 171 530 913 1,987
Investor Class 146 452 782 1,713
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You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class A $697 $1,007 $1,338 $2,273
Class B 221 682 1,170 2,349
Class C 221 682 1,170 2,513
Class R 171 530 913 1,987
Investor Class 146 452 782 1,713
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THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 2003, the advisor received compensation of 0.67% of average daily net assets.
PORTFOLIO MANAGERS
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
- 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.
SALES CHARGES
Purchases of Class A shares of AIM Capital Development Fund are subject to the maximum 5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. Certain purchases of Class R shares may be subject to the contingent deferred sales charge listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal years 2003, 2002 and 2001 has been audited by Ernst & Young LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2001 was audited by other public accountants.
As of the date of this prospectus, the Investor Class shares had not yet commenced operations and, therefore, financial information for such shares is not available.
CLASS A
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SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------- -------- -------- -------- -------- --------
Net asset value, beginning of period $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24 $ 12.89
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Income from investment operations:
Net investment income (loss) (0.02) (0.08)(a) (0.04)(a) (0.04) (0.13) (0.10)(a)
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Net gains (losses) on securities (both
realized and unrealized) 1.34 3.94 (1.85) (4.27) 6.68 2.45
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Total from investment operations 1.32 3.86 (1.89) (4.31) 6.55 2.35
============================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) -- --
============================================================================================================================
Net asset value, end of period $ 17.56 $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24
____________________________________________________________________________________________________________________________
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Total return(b) 8.03% 30.16% (12.87)% (21.76)% 42.98% 18.23%
____________________________________________________________________________________________________________________________
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Ratios/supplemental data:
Net assets, end of period (000s omitted) $585,200 $545,691 $456,268 $576,660 $759,838 $579,514
____________________________________________________________________________________________________________________________
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Ratio of expenses to average net assets 1.36%(c) 1.53% 1.38% 1.33% 1.28% 1.38%
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Ratio of net investment income (loss) to
average net assets (0.19)%(c) (0.56)% (0.29)% (0.21)% (0.60)% (0.70)%
____________________________________________________________________________________________________________________________
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Portfolio turnover rate(d) 30% 101% 120% 130% 101% 117%
____________________________________________________________________________________________________________________________
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. 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 $579,873,452.
(d) Not annualized for periods less than one year.
CLASS B
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SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED --------------------------------------------------------------
APRIL 30, 2004 2003 2002 2001 2000 1999
-------------- -------- -------- -------- -------- --------
Net asset value, beginning of period $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90 $ 12.70
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Income from investment operations:
Net investment income (loss) (0.07) (0.16)(a) (0.14)(a) (0.15) (0.26) (0.20)(a)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.26 3.74 (1.75) (4.12) 6.52 2.40
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Total from investment operations 1.19 3.58 (1.89) (4.27) 6.26 2.20
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Less distributions from net realized gains (0.42) -- -- (2.79) -- --
================================================================================================================================
Net asset value, end of period $ 16.56 $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 7.64% 29.32% (13.40)% (22.29)% 42.01% 17.32%
________________________________________________________________________________________________________________________________
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Ratios/supplemental data:
Net assets, end of period (000s omitted) $403,059 $392,382 $346,456 $454,018 $617,576 $451,508
________________________________________________________________________________________________________________________________
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Ratio of expenses to average net assets 2.01%(c) 2.18% 2.03% 1.99% 1.99% 2.12%
================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.84)%(c) (1.21)% (0.94)% (0.87)% (1.30)% (1.44)%
________________________________________________________________________________________________________________________________
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Portfolio turnover rate(d) 30% 101% 120% 130% 101% 117%
________________________________________________________________________________________________________________________________
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. 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 $410,867,647.
(d) Not annualized for periods less than one year.
CLASS C
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SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED ---------------------------------------------------------
APRIL 30, 2004 2003 2002 2001 2000 1999
-------------- ------- ------- ------- ------- -------
Net asset value, beginning of period $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89 $ 12.69
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Income from investment operations:
Net investment income (loss) (0.07) (0.16)(a) (0.14)(a) (0.14) (0.25) (0.20)(a)
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Net gains (losses) on securities (both
realized and unrealized) 1.26 3.74 (1.76) (4.12) 6.51 2.40
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Total from investment operations 1.19 3.58 (1.90) (4.26) 6.26 2.20
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Less distributions from net realized gains (0.42) -- -- (2.79) -- --
===========================================================================================================================
Net asset value, end of period $ 16.55 $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89
___________________________________________________________________________________________________________________________
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Total return(b) 7.64% 29.34% (13.48)% (22.24)% 42.04% 17.34%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $74,448 $68,356 $56,298 $66,127 $82,982 $53,832
___________________________________________________________________________________________________________________________
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Ratio of expenses to average net assets 2.01%(c) 2.18% 2.03% 1.99% 1.99% 2.12%
===========================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.84)%(c) (1.21)% (0.94)% (0.87)% (1.30)% (1.44)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(d) 30% 101% 120% 130% 101% 117%
___________________________________________________________________________________________________________________________
===========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. 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 $72,950,442.
(d) Not annualized for periods less than one year.
CLASS R
----------------------------------------------------
JUNE 3, 2002
(DATE SALES
SIX MONTHS YEAR ENDED COMMENCED) TO
ENDED OCTOBER 31, OCTOBER 31,
APRIL 30, 2004 2003 2002
-------------- ----------- -------------
Net asset value, beginning of period $16.62 $12.79 $ 16.62
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.10)(a) (0.03)(a)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.32 3.93 (3.80)
==================================================================================================================
Total from investment operations 1.30 3.83 (3.83)
==================================================================================================================
Less distributions from net realized gains (0.42) -- --
==================================================================================================================
Net asset value, end of period $17.50 $16.62 $ 12.79
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 7.92% 29.95% (23.05)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,682 $1,154 $ 10
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 1.51%(c) 1.68% 1.54%(d)
==================================================================================================================
Ratio of net investment income (loss) to average net assets (0.34)%(c) (0.71)% (0.44)%(d)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(e) 30% 101% 120%
__________________________________________________________________________________________________________________
==================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $1,864,779.
(d) Annualized.
(e) Not annualized for periods less than one year.
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 AIM funds.
CHOOSING A SHARE CLASS
Many of the AIM funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. When choosing a share class, you should consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B(4) CLASS C CLASS R INVESTOR CLASS
----------------------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2,3) within six years within one
year(6)
- Generally, lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.35% 1.00% 1.00% 0.50% 0.25%(7)
service (12b-1)
fee than Class B,
Class C or Class
R shares (See
"Fee Table and
Expense Example")
- Does not convert - Converts to Class - Does not convert - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(5)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only - Closed to new
appropriate for appropriate for limited to appropriate for available to the investors, except
long-term short- term amounts less than short- term following types as described in
investors investors $100,000 investors of retirement the "Purchasing
plans: (i) all Shares -- Grandfathered
section 401 and Investors"
457 plans, (ii) section of your
section 403 plans prospectus
sponsored by
section 501(c)(3)
organizations,
and (iii) IRA
rollovers from
such plans if an
AIM fund was
offered
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Certain AIM funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) Effective September 30, 2003, Class B shares will not be made available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code. These plans include 401(k) plans (including AIM Solo 401(k) plans), money purchase pension plans and profit sharing plans. Plans that have existing accounts invested in Class B shares will continue to be allowed to make additional purchases.
(5) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. AIM Global Equity Fund: If you held Class B shares on May 29, 1998 and continue to hold them, those shares will convert to Class A shares of that fund at the end of the month which is seven years after the date on which shares were purchased. If you exchange those shares for Class B shares of another AIM fund, the shares into which you exchanged will not convert to Class A shares until the end of the month which is eight years after the date on which you purchased your original shares.
(6) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another AIM fund that are subject to a CDSC into AIM Short Term Bond Fund.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares and AIM Money Market Fund and AIM Tax-Exempt Cash Fund with respect to their Investor Class shares) has adopted 12b-1 plans that allow the AIM fund to pay distribution fees to A I M Distributors, Inc. (the distributor) for the sale and distribution of its shares and fees for services provided to shareholders, all or a substantial portion of which are paid to the dealer of record. Because the AIM fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your
MCF--11/04
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Sales charges on the AIM funds and classes of those Funds are detailed below. As
used below, the term "offering price" with respect to all categories of Class A
shares includes the initial sales charge.
Certain categories of persons are permitted to purchase Class A shares of AIM funds without paying an initial sales charge because their transactions involve little expense, such as persons who have a relationship with the funds or with AIM and certain programs for purchase. For more detailed information regarding eligibility to purchase or redeem shares at reduced or without sales charges, please consult the fund's website at www.aiminvestments.com and click on the links "My Account", Service Center, or consult the fund's Statement of Additional Information, which is available free of charge.
INITIAL SALES CHARGES
The AIM funds (except AIM Short Term Bond Fund) are grouped into three
categories with respect to initial sales charges. The "Other Information"
section of your prospectus will tell you in what category your particular AIM
fund is classified.
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
------------------------------------------------------------------------------
|
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 2.50% 2.56%
$100,000 but less than $ 250,000 2.00 2.04
$250,000 but less than $ 500,000 1.50 1.52
$500,000 but less than $1,000,000 1.25 1.27
------------------------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
You will not pay an initial sales charge or a CDSC on Investor Class shares of any AIM fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II AIM funds and AIM Short Term Bond Fund at net asset value.
However, if you redeem these shares prior to 18 months after the date of
purchase, they will be subject to a CDSC of 1%.
If you currently own Class A shares of a Category I, II or III AIM fund or AIM Short Term Bond Fund and make additional purchases (through October 30, 2002 for Category III AIM funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II AIM fund and AIM Short Term Bond Fund shares, and a 12-month, 0.25% CDSC for Category III AIM fund shares). The CDSC for Category III AIM fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. If the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
MCF--11/04
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE PURCHASE MADE CLASS B CLASS C -------------------------------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None -------------------------------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify for these reductions or exceptions, you or your financial consultant must notify the transfer agent at the time of purchase that your purchase qualifies for such treatment. Certain individuals and employer-sponsored retirement plans may link accounts for the purpose of qualifying for lower initial sales charges. You or your financial consultant must provide other account numbers to be considered for Rights of Accumulation, or mark the Letter of Intent section on the account application, or provide other relevant documentation, so that the transfer agent can verify your eligibility for the reduction or exception. Consult the fund's Statement of Additional Information for details.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any AIM or INVESCO fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares of an AIM or INVESCO fund
with AIM and/or INVESCO fund shares currently owned (Class A, B, C, K or R) for
the purpose of qualifying for the lower initial sales charge rates that apply to
larger purchases. The applicable initial sales charge for the new purchase is
based on the total of your current purchase and the public offering price of all
other shares you own. The transfer agent may automatically link certain accounts
registered in the same name, with the same taxpayer identification number, for
the purpose of qualifying you for lower initial sales charge rates.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM and/or INVESCO funds during a 13-month period. The
amount you agree to purchase determines the initial sales charge you pay. If the
full face amount of the LOI is not invested by the end of the 13-month period,
your account will be adjusted to the higher initial sales charge level for the
amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM and INVESCO funds; and
- when a merger, consolidation, or acquisition of assets of an AIM or INVESCO fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem Class C shares of an AIM fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
MCF--11/04
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
TOOLS USED TO COMBAT EXCESSIVE SHORT-TERM TRADING ACTIVITY
While the funds provide their shareholders with daily liquidity, their investment programs are designed to serve long-term investors. Excessive short-term trading activity in the funds' shares (i.e., a purchase of fund shares followed shortly thereafter by a redemption of such shares, or vice versa) may hurt the long-term performance of certain funds by requiring them to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time. A I M Advisors, Inc. and its affiliates (collectively, the "AIM Affiliates") currently use the following tools designed to discourage excessive short-term trading in the retail funds within The AIM Family of Funds(R) and the INVESCO family of funds (together, the "funds"):
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) selective use of fair value pricing.
Each of these tools is described in more detail below. Although these tools are designed to discourage excessive short-term trading, you should understand that none of these tools alone nor all of them taken together eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with shareholder interests.
TRADE ACTIVITY MONITORING
The AIM Affiliates monitor selected trades on a daily basis in an effort to detect excessive short-term trading activities. If, as a result of this monitoring, the AIM Affiliates believe that a shareholder has engaged in excessive short-term trading, they may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's accounts other than exchanges into a money market fund. In making such judgments, the AIM Affiliates seek to act in a manner that they believe is consistent with the best interests of shareholders.
The ability of the AIM Affiliates to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts. This is one reason why this tool cannot eliminate the possibility of excessive short-term trading.
TRADING GUIDELINES
If you exceed four exchanges out of a fund (other than AIM Money Market Fund, AIM Tax-Exempt Cash Fund, AIM Limited Maturity Treasury Fund and INVESCO U.S. Government Money Fund) per calendar year, or a fund or the distributor determines, in its sole discretion, that your short-term trading activity is excessive (regardless of whether or not you exceed such guidelines), it may, in its discretion, reject any additional purchase and exchange orders. Each fund and the distributor reserves the discretion to accept exchanges in excess of these guidelines on a case-by-case basis if it believes that granting such exceptions would be consistent with the best interests of shareholders. An exchange is the movement out of (redemption) one fund and into (purchase) another fund.
The ability of the AIM Affiliates to monitor exchanges made by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts. This is one reason why this tool cannot eliminate the possibility of excessive short-term trading.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by exchange, Class A, Investor Class or Institutional Class (applicable only to INVESCO S&P 500 Index Fund) shares of certain funds within 30 days of purchase. The AIM Affiliates expect to charge the redemption fee on other classes of shares when the funds' transfer agent system has the capability of processing the fee across these other classes. See "Redeeming Shares -- Redemption Fee" for more information.
The ability of a fund to assess a redemption fee on the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder account and may be further limited by systems limitations applicable to these types of accounts. Additionally, the AIM Affiliates maintain certain retirement plan accounts on a record keeping system that is currently incapable of processing the redemption fee. The provider of this system is working to enhance the system to facilitate the processing of this fee. These are two reasons why this tool cannot eliminate the possibility of excessive short-term trading activity.
FAIR VALUE PRICING
The trading hours for most foreign securities end prior to the close of the New York Stock Exchange, the time the fund's net asset value is calculated. The occurrence of certain events after the close of foreign markets, but prior to the close of the U.S. market (such as a significant surge or decline in the U.S. market) often will result in an adjustment to the trading prices of foreign securities when foreign markets open on the following business day. If such events occur, the fund may value foreign securities at fair value, taking into account such events, when it calculates its net asset value. Fair value determinations are made in good faith in accordance with procedures adopted by the Board of Directors or Trustees of the fund. See "Pricing of Shares -- Determination of Net Asset Value" for more information.
MCF--11/04
Fair value pricing results in an estimated price and may reduce the possibility that short-term traders could take advantage of potentially "stale" prices of portfolio holdings. However, if cannot eliminate the possibility of excessive short-term trading.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for AIM fund accounts are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Employer-Sponsored Retirement Plans (includes section 401, $ 0 ($25 per AIM fund investment for $50
403 and 457 plans, and SEP, SARSEP and SIMPLE IRA plans) salary deferrals from Employer-
Sponsored Retirement Plans)
Systematic Purchase Plan 50 50
IRA, Roth IRA or Coverdell ESA 250 50
All other accounts 1,000 50
-------------------------------------------------------------------------------------------------------------------------
|
The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
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
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, AIM from your confirmation statement to the
Investment Services, Inc., P.O. Box transfer agent.
4739, Houston, TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
reference number. Then, use the
following wire instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: AIM
Investment Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- option on
your completed account application or
complete an AIM Bank Connection form.
Mail the application or form to the
transfer agent. Once the transfer agent
has received the form, call the
transfer agent to place your purchase
order.
Call the AIM 24-hour Automated Investor
Line at 1-800-246-5463. You may place
your order after you have provided the
bank instructions that will be
requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
MCF--11/04
GRANDFATHERED INVESTORS
Investor Class shares of a fund may be purchased only by: (1) persons or
entities who had established an account, prior to April 1, 2002, in Investor
Class shares of any of the funds currently distributed by A I M Distributors,
Inc. (the "Grandfathered Funds") and have continuously maintained such account
in Investor Class shares since April 1, 2002; (2) any person or entity listed in
the account registration for any Grandfathered Funds, which account was
established prior to April 1, 2002 and continuously maintained since April 1,
2002, such as joint owners, trustees, custodians and designated beneficiaries;
(3) customers of certain financial institutions, wrap accounts or other
fee-based advisory programs, or insurance company separate accounts, which have
had relationships with A I M Distributors, Inc. and/or any of the Grandfathered
Funds prior to April 1, 2002 and continuously maintained such relationships
since April 1, 2002; (4) defined benefit, defined contribution and deferred
compensation plans; and (5) AIM and INVESCO fund trustees and directors,
employees of AMVESCAP PLC and its subsidiaries, AMVESCAP directors, and their
immediate families.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the AIM funds by authorizing
the AIM fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Systematic Purchase Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM or INVESCO fund account to one or more
other AIM or INVESCO fund accounts with the identical registration. The account
from which exchanges are to be made must have a minimum balance of $5,000 before
you can use this option. Exchanges will occur on (or about) the 10th or 25th day
of the month, whichever you specify, in the amount you specify. The minimum
amount you can exchange to another AIM or INVESCO fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM or INVESCO fund at net asset value. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM or
INVESCO fund. You may invest your dividends and distributions (1) into another
AIM or INVESCO fund in the same class of shares; or (2) from Class A shares into
AIM Cash Reserve Shares of AIM Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another AIM fund:
(1) Your account balance (a) in the AIM or INVESCO fund paying the dividend must be at least $5,000; and (b) in the AIM or INVESCO fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into another AIM or INVESCO fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM and INVESCO fund holdings should be rebalanced, on a
percentage basis, between two and ten of your AIM and INVESCO funds on a
quarterly, semiannual or annual basis. Your portfolio will be rebalanced through
the exchange of shares in one or more of your AIM or INVESCO funds for shares of
the same class of one or more other AIM or INVESCO funds in your portfolio. If
you wish to participate in the Program, make changes or cancel the Program, the
transfer agent must receive your request to participate, changes, or
cancellation in good order at least five business days prior to the next
rebalancing date, which is normally the 28th day of the last month of the period
you choose. You may realize taxable gains from these exchanges. We may modify,
suspend or terminate the Program at any time on 60 days prior written notice.
RETIREMENT PLANS
Shares of most of the AIM funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM sponsored retirement plans, which
include IRAs, Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans,
401(k) plans and Money Purchase/Profit Sharing plans, or another sponsor's
retirement plan. The plan custodian of the AIM sponsored retirement plan
assesses an annual maintenance fee of $10. Contact your financial consultant for
details.
REDEEMING SHARES
REDEMPTION FEE
You may be charged a 2% redemption fee (on total redemption proceeds) if you redeem, including redeeming by exchange, Class A, Investor Class or Institutional Class (applicable only to INVESCO S&P 500 Index Fund) shares of the following funds (either by selling or
MCF--11/04
exchanging to another AIM fund or INVESCO fund) within 30 days of their purchase:
AIM Asia Pacific Growth Fund AIM Global Value Fund AIM Developing Markets Fund AIM High Yield Fund AIM European Growth Fund AIM International Emerging Growth Fund AIM European Small Company Fund AIM International Growth Fund AIM Global Aggressive Growth Fund AIM Trimark Fund AIM Global Growth Fund INVESCO International Core Equity Fund AIM Global Equity Fund INVESCO S&P 500 Index Fund |
The redemption fee will be retained by the fund from which you are redeeming shares (including redemptions by exchange), and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of the fund. The redemption fee is imposed to the extent that the number of fund shares you redeem exceeds the number of fund shares that you have held for more than 30 days. In determining whether the minimum 30 day holding period has been met, only the period during which you have held shares of the fund from which you are redeeming is counted. For this purpose, shares held longest will be treated as being redeemed first and shares held shortest as being redeemed last.
The 2% redemption fee will not be charged on transactions involving the following:
(1) total or partial redemptions of shares by omnibus accounts maintained by brokers that do not have the systematic capability to process the redemption fee;
(2) total or partial redemptions of shares by approved fee-based programs that do not have the systematic capability to process the redemption fee;
(3) total or partial redemptions of shares held through retirement plans maintained pursuant to Sections 401, 403, 408, 408A and 457 of the Internal Revenue Code (the "Code") where the systematic capability to process the redemption fee does not exist;
(4) total or partial redemptions effectuated pursuant to an automatic non-discretionary rebalancing program or a systematic withdrawal plan set up in the funds;
(5) total or partial redemptions requested within 30 days following the death or
post-purchase disability of (i) any registered shareholder on an account or
(ii) the settlor of a living trust which is the registered shareholder of an
account, of shares held in the account at the time of death or initial
determination of post-purchase disability;
(6) total or partial redemption of shares acquired through investment of dividends and other distributions; or
(7) redemptions initiated by a fund.
The AIM Affiliates' goals are to apply the redemption fee on all classes of shares regardless of the type of account in which such shares are held. This goal is not immediately achievable because of systems limitations and marketplace resistance. Currently, the redemption fee may be applied on Class A and Investor Class shares (and Institutional Shares for INVESCO S&P 500 Index Fund). AIM expects to charge the redemption fee on all other classes of shares when the funds' transfer agent system has the capability of processing the fee across these other classes. In addition, AIM intends to develop a plan to encourage brokers that maintain omnibus accounts, sponsors of fee-based program accounts and retirement plan administrators for accounts that are exempt from the redemption fee pursuant to the terms above to modify computer programs to impose the redemption fee or to develop alternate processes to monitor and restrict short-term trading activity in the funds. Lastly, the provider of AIM's retirement plan record keeping system is working to enhance the system to facilitate the processing of the redemption fee. Until such computer programs are modified or alternate processes are developed, the fund's ability to assess a redemption fee on these types of share classes and accounts is severely limited. These are reasons why the redemption fees cannot eliminate the possibility of excessive short-term trading activity.
The funds have the discretion to waive the 2% redemption fee if a fund is in jeopardy of failing the 90% income test or losing its registered investment company qualification for tax purposes.
Your broker or financial consultant may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase $1,000,000 or more of Class A shares of a Category I, II or III AIM fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund or AIM Short Term Bond within 18 months of initial
Fund purchase of Category I or II
- Class A shares of Category III Fund or AIM Short Term Bond
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of a Category III Fund.
MCF--11/04
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III AIM funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III AIM funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund or AIM Short Term II Fund or AIM Short Term Bond within 18 months of initial
Bond Fund Fund purchase of Category I or II
- Class A shares of Category III Fund or AIM Short Term Bond
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund or AIM Short Term Bond within 18 months of initial
Fund purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or AIM Short or II Fund or AIM Short Term within 18 months of initial
Term Bond Fund Bond Fund purchase of Category I or II
- Class A shares of Category III Fund or AIM Short Term Bond
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund or AIM Short Term within 18 months of initial
Bond Fund purchase of Category III Fund
shares
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
|
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of
Category III Fund.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM Floating Rate Fund, the early withdrawal charge applicable to shares of AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares.
MCF--11/04
Through a Financial Consultant Contact your financial consultant.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered owners; (2) the
name of the AIM fund and your account
number; (3) if the transfer agent does not
hold your shares, endorsed share
certificates or share certificates
accompanied by an executed stock power; and
(4) signature guarantees, if necessary (see
below). The transfer agent may require that
you provide additional information, such as
corporate resolutions or powers of attorney,
if applicable. If you are redeeming from an
IRA account, you must include a statement of
whether or not you are at least 59 1/2 years
old and whether you wish to have federal
income tax withheld from your proceeds. The
transfer agent may require certain other
information before you can redeem from an
employer-sponsored retirement plan. Contact
your employer for details.
By Telephone Call the transfer agent or our AIM 24-hour
Automated Investor Line at 1-800-246-5463.
You will be allowed to redeem by telephone
if (1) the proceeds are to be mailed to the
address on record (if there has been no
change communicated to us within the last 30
days) or transferred electronically to a
pre-authorized checking account; (2) you do
not hold physical share certificates; (3)
you can provide proper identification
information; (4) the proceeds of the
redemption do not exceed $250,000; and (5)
you have not previously declined the
telephone redemption privilege. Certain
accounts, including retirement accounts and
403(b) plans, may not be redeemed by
telephone. The transfer agent must receive
your call during the hours of the customary
trading session of the New York Stock
Exchange (NYSE) in order to effect the
redemption at that day's closing price. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.com. You will be allowed
to redeem by internet if (1) you do not hold
physical share certificates; (2) you can
provide proper identification information;
(3) the proceeds of the redemption do not
exceed $250,000; and (4) you have already
provided proper bank information. AIM
prototype retirement accounts may not be
redeemed on the internet. The transfer agent
must confirm your transaction during the
hours of the customary trading session of
the NYSE in order to effect the redemption
at that day's closing price.
|
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no more than seven days, after we accept your request to redeem. If you redeem shares recently purchased by check, you will be required to wait up to ten business days before we will send your redemption proceeds. This delay is necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
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.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $100. You also may make annual withdrawals if you own Class A
shares. We will redeem enough shares from your account to cover the amount
withdrawn. You must have an account balance of at least $5,000 to establish a
Systematic Redemption Plan. You can stop this plan at any time by giving ten
days prior notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--11/04
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND AND AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND ONLY)
You may redeem shares of these AIM funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $250,000;
(2) you request that payment be made to someone other than the name registered on the account;
(3) you request that payment be sent somewhere other than the bank of record on the account; or
(4) you request that payment be sent to a new address or an address that changed in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of financial institutions. Call the transfer agent for additional information. Some institutions have transaction amount maximums for these guarantees. Please check with the guarantor institution.
REDEMPTIONS IN KIND
Although the AIM funds and the INVESCO funds generally intend to pay redemption proceeds solely in cash, the AIM funds and the INVESCO funds reserve the right to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class shares only) has been open at least one year, you have not made an additional purchase in the account during the past six calendar months, and the value of your account falls below $500 ($250 for Investor Class shares) for three consecutive months due to redemptions or exchanges (excluding retirement accounts), the AIM funds have the right to redeem the account after giving you 60 days' prior written notice. You may avoid having your account redeemed during the notice period by bringing the account value up to $500 ($250 for Investor Class shares) or by utilizing the Automatic Investment Plan.
If an AIM fund determines that you have not provided a correct Social Security or other tax ID number on your account application, or the AIM fund is not able to verify your identity as required by law, the AIM fund may, at its discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM fund for those of another AIM or INVESCO fund. Before requesting an exchange, review the prospectus of the AIM or INVESCO fund you wish to acquire. Exchange privileges also apply to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
You may be charged a redemption fee on certain redemptions, including exchanges. See "Redeeming Shares -- Redemption Fee."
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM or INVESCO fund.
You may also exchange:
(1) Class A shares of an AIM or INVESCO fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) or INVESCO fund for Class A3 shares of an AIM fund;
(3) Class A3 shares of an AIM fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM fund for Class A shares of any AIM fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or INVESCO fund;
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM fund;
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective
MCF--11/04
February 17, 2003, and AIM Tax-Exempt Cash Fund) or INVESCO fund;
(7) Investor Class shares of an AIM or INVESCO fund for Class A shares of any AIM fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or INVESCO fund or Class A3 shares of an AIM fund; or
(8) Class A or A3 shares of an AIM or INVESCO fund for Investor Class shares of any AIM or INVESCO fund as long as you are eligible to purchase Investor Class shares of any AIM or INVESCO fund at the time of exchange.
You may be required to pay an initial sales charge when exchanging from a fund with a lower initial sales charge than the one into which you are exchanging. If you exchange into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM or INVESCO fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge for
(a) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or
(b) Class A shares of another AIM or INVESCO Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM or INVESCO fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares;
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund for Class A shares of a Category III AIM fund after February 16, 2003; or
(2) Class A shares of a Category III AIM fund for Class A shares of another Category III AIM fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II AIM funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III AIM funds purchased at net asset value for Class A shares of a Category I or II AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM or INVESCO fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of a Category I or II AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III AIM Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM or INVESCO fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or MCF--11/04
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM or INVESCO fund or for Class A shares of any AIM or INVESCO fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II AIM fund or AIM Short Term Bond Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II AIM fund or AIM Short Term Bond Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM or INVESCO fund into which you are exchanging;
- Shares of the AIM or INVESCO fund you wish to acquire must be available for sale in your state of residence;
- Exchanges must be made between accounts with identical registration information;
- The account you wish to exchange from must have a certified tax identification number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange; and
- If you have physical share certificates, you must return them to the transfer agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM or INVESCO fund may delay the purchase of shares being acquired in an exchange for up to five business days if it determines that it would be materially disadvantaged by the immediate transfer of exchange proceeds. The exchange privilege is not an option or right to purchase shares. Any of the participating AIM or INVESCO funds or the distributor may modify or terminate this privilege at any time. The AIM or INVESCO fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of each registered owner exactly as the shares are registered, the account registration and account number, the dollar amount or number of shares to be exchanged and the names of the AIM or INVESCO funds from which and into which the exchange is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by telephone, including that the transfer agent must receive exchange requests during the hours of the customary trading session of the NYSE; however, you still will be allowed to exchange by telephone even if you have changed your address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
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 funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and AIM Tax-Free Intermediate Fund value variable rate securities that have an unconditional demand or put feature exercisable within seven days or less at par, which reflects the market value of such securities.
The AIM funds value all other securities and assets at their fair value. 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 AIM funds' shares are determined as of the close of the respective markets. Events affecting the values of such securities may occur between the times at which the particular foreign market closes and the close of the customary
MCF--11/04
trading session of the NYSE which would not ordinarily be reflected in the computation of the AIM 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 the 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. 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. AIM Money Market Fund also determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
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 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 or INVESCO fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING "OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR PROSPECTUS.
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 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.
MCF--11/04
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.
AIMinvestments.com CDV-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
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 CLASS A, CLASS B, CLASS C, CLASS R AND INVESTOR CLASS SHARES, AS APPLICABLE, 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 PROSPECTUSES FOR THE CLASS A, CLASS B, CLASS C, CLASS R AND INVESTOR CLASS SHARES, AS APPLICABLE, OF THE FUNDS LISTED BELOW. YOU MAY OBTAIN A COPY OF ANY PROSPECTUS FOR ANY FUND 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 NOVEMBER 30, 2004, RELATES TO THE CLASS A, CLASS B, CLASS C, CLASS R AND INVESTOR CLASS SHARES, AS APPLICABLE, OF THE FOLLOWING PROSPECTUSES:
FUND DATED
---- -----
AIM AGGRESSIVE GROWTH FUND FEBRUARY 27, 2004
AIM BLUE CHIP FUND FEBRUARY 27, 2004
AIM CAPITAL DEVELOPMENT FUND NOVEMBER 30, 2004
AIM CHARTER FUND FEBRUARY 27, 2004
AIM CONSTELLATION FUND FEBRUARY 27, 2004
AIM CORE STRATEGIES FUND FEBRUARY 27, 2004
AIM DENT DEMOGRAPHIC TRENDS FUND FEBRUARY 27, 2004
AIM DIVERSIFIED DIVIDEND FUND FEBRUARY 27, 2004
AIM EMERGING GROWTH FUND FEBRUARY 27, 2004
AIM LARGE CAP BASIC VALUE FUND FEBRUARY 27, 2004
AIM LARGE CAP GROWTH FUND FEBRUARY 27, 2004
AIM MID CAP GROWTH FUND FEBRUARY 27, 2004
AIM SELECT BASIC VALUE FUND FEBRUARY 27, 2004
AIM U.S. GROWTH FUND FEBRUARY 27, 2004
AIM WEINGARTEN FUND FEBRUARY 27, 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......................................................... 4
Classification.......................................................................................... 4
Investment Strategies and Risks......................................................................... 4
Equity Investments............................................................................. 8
Foreign Investments............................................................................ 8
Debt Investments............................................................................... 10
Other Investments.............................................................................. 11
Investment Techniques.......................................................................... 12
Derivatives.................................................................................... 16
Additional Securities or Investment Techniques................................................. 22
Fund Policies........................................................................................... 23
Temporary Defensive Positions........................................................................... 26
MANAGEMENT OF THE TRUST.......................................................................................... 26
Board of Trustees....................................................................................... 26
Management Information.................................................................................. 26
Trustee Ownership of Fund Shares............................................................... 28
Factors Considered in Approving the Investment Advisory Agreement.............................. 28
Compensation............................................................................................ 29
Retirement Plan For Trustees................................................................... 29
Deferred Compensation Agreements............................................................... 29
Purchase of Class A Shares of the Funds at Net Asset Value..................................... 30
Codes of Ethics......................................................................................... 30
Proxy Voting Policies................................................................................... 30
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............................................................. 31
INVESTMENT ADVISORY AND OTHER SERVICES........................................................................... 31
Investment Advisor...................................................................................... 31
Investment Sub-Advisor.................................................................................. 33
Service Agreements...................................................................................... 34
Other Service Providers................................................................................. 34
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................................................... 35
Brokerage Transactions.................................................................................. 35
Commissions............................................................................................. 36
Brokerage Selection..................................................................................... 36
Directed Brokerage (Research Services).................................................................. 37
Regular Brokers or Dealers.............................................................................. 37
Allocation of Portfolio Transactions.................................................................... 37
Allocation of Initial Public Offering ("IPO") Transactions.............................................. 37
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................................................... 38
Purchase and Redemption of Shares....................................................................... 38
Offering Price.......................................................................................... 54
Redemption In Kind...................................................................................... 55
Backup Withholding...................................................................................... 56
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PAGE
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS......................................................................... 56
Dividends and Distributions............................................................................. 56
Tax Matters............................................................................................. 57
DISTRIBUTION OF SECURITIES....................................................................................... 64
Distribution Plans...................................................................................... 64
Distributor............................................................................................. 67
CALCULATION OF PERFORMANCE DATA.................................................................................. 68
REGULATORY INQUIRIES AND PENDING LITIGATION...................................................................... 74
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 OF
REGULAR BROKERS OR DEALERS...................................................................................... I-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS......................................... J-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS................................................... K-1
TOTAL SALES CHARGES............................................................................................. L-1
PERFORMANCE DATA................................................................................................ M-1
PENDING LITIGATION.............................................................................................. N-1
FINANCIAL STATEMENTS............................................................................................. FS
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GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Equity Funds (the "Trust") is a Delaware statutory trust which 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 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 Diversified Dividend Fund, AIM Emerging Growth Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Mid Cap Growth Fund, AIM Select Basic Value Fund (which is not currently offered to the public), 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 Core Strategies Fund, AIM Diversified Dividend Fund, AIM Select Basic Value 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:
FUND CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
CLASS CLASS
AIM Aggressive Growth Fund X X X X X
AIM Blue Chip Fund X X X X X X
AIM Capital Development Fund X 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
AIM Large Cap Growth Fund X X X X X
AIM Mid Cap Growth Fund X X X X
AIM Select Basic Value Fund 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 Class A, Class B, Class C, Class R and Investor Class shares, if applicable, of the Funds. The Institutional Class shares of the Funds are intended for use by certain eligible institutional investors, are discussed in a separate Statement of Additional Information and are available to the following:
o banks and trust companies acting in a fiduciary or similar capacity;
o bank and trust company common and collective trust funds;
o banks and trust companies investing for their own account;
o entities acting for the account of a public entity (e.g. Taft-Hartley funds, states, cities or government agencies);
o retirement plans; and
o platform sponsors with which A I M Distributors, Inc. ("AIM Distributors") has entered into an agreement.
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 generally 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.
Because Class B shares automatically convert to Class A shares at month-end eight years after the date of purchase, the Funds' distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act requires that Class B shareholders must also approve any material increase in distribution fees submitted to Class A shareholders of that Fund. A pro rata portion of shares from reinvested dividends and distributions convert along with the Class B shares.
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 other than AIM Emerging Growth Fund 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 AIM AIM AIM AIM AIM AIM AIM AIM
AGGRESSIVE BLUE CAPITAL CHARTER CONSTELLATION CORE DENT DIVERSIFIED EMERGING
GROWTH CHIP DEVELOPMENT FUND FUND STRATEGIES DEMOGRAPHIC DIVIDEND GROWTH
SECURITY/ FUND FUND FUND FUND TRENDS FUND FUND
INVESTMENT FUND
TECHNIQUE
EQUITY INVESTMENTS
Common Stock X X X X X X X X X
Preferred Stock X X X X X X X X X
Convertible X X X X X X X X X
Securities
Alternative X X X X X X X X X
Entity
Securities
FOREIGN INVESTMENTS
Foreign X X X X X X X X X
Securities
Foreign X X X X X X X X X
Government
Obligations
Foreign X X X X X X X X X
Exchange
Transactions
DEBT INVESTMENTS FOR EQUITY FUNDS
U.S. X X X X X X X X X
Government
Obligations
Liquid Assets X X X X X X X X X
Investment X X X X X X X X X
Grade
Corporate Debt
Obligations
Junk Bonds
OTHER INVESTMENTS
REITs X X X X X X X X X
Other X X X X X X X X X
Investment
Companies
Defaulted
Securities
Municipal
Forward
Contracts
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FUND AIM AIM AIM AIM AIM AIM
LARGE LARGE MID SELECT U.S. WEINGARTEN
CAP CAP CAP BASIC GROWTH FUND
SECURITY/ BASIC GROWTH GROWTH VALUE FUND
INVESTMENT VALUE FUND FUND FUND
TECHNIQUE FUND
EQUITY INVESTMENTS
Common Stock X X X X X X
Preferred Stock X X X X X X
Convertible X X X X X X
Securities
Alternative X X X X X X
Entity
Securities
FOREIGN INVESTMENTS
Foreign X X X X X X
Securities
Foreign X X X X X X
Government
Obligations
Foreign X X X X X X
Exchange
Transactions
DEBT INVESTMENTS FOR EQUITY FUNDS
U.S. X X X X X X
Government
Obligations
Liquid Assets X X X X X X
Investment X X X X X X
Grade
Corporate Debt
Obligations
Junk Bonds
OTHER INVESTMENTS
REITs X X X X X X
Other X X X X X X
Investment
Companies
Defaulted
Securities
Municipal
Forward
Contracts
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FUND AIM AIM AIM AIM AIM AIM AIM AIM AIM
AGGRESSIVE BLUE CAPITAL CHARTER CONSTELLATION CORE DENT DIVERSIFIED EMERGING
GROWTH CHIP DEVELOPMENT FUND FUND STRATEGIES DEMOGRAPHIC DIVIDEND GROWTH
SECURITY/ FUND FUND FUND FUND TRENDS FUND FUND
INVESTMENT FUND
TECHNIQUE
Variable or
Floating Rate
Instruments
Indexed
Securities
Zero-Coupon
and
Pay-in-Kind
Securities
Synthetic
Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed X X X X X X X X X
Delivery
Transactions
When-Issued X X X X X X X X X
Securities
Short Sales X X X X X X X X X
Margin
Transactions
Swap Agreements X X X X X X X X X
Interfund Loans X X X X X X X X X
Borrowing X X X X X X X X X
Lending X X X X X X X X X
Portfolio
Securities
Repurchase X X X X X X X X X
Agreements
Reverse
Repurchase X X X X X
Agreements
Dollar Rolls
Illiquid X X X X X X X X X
Securities
Rule 144A X X X X X X X X X
Securities
Unseasoned X X X X X
Issuers
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FUND AIM AIM AIM AIM AIM AIM
LARGE LARGE MID SELECT U.S. WEINGARTEN
CAP CAP CAP BASIC GROWTH FUND
SECURITY/ BASIC GROWTH GROWTH VALUE FUND
INVESTMENT VALUE FUND FUND FUND
TECHNIQUE FUND
Variable or
Floating Rate
Instruments
Indexed
Securities
Zero-Coupon
and
Pay-in-Kind
Securities
Synthetic
Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed X X X X X X
Delivery
Transactions
When-Issued X X X X X X
Securities
Short Sales X X X X X X
Margin
Transactions
Swap Agreements X X X X X X
Interfund Loans X X X X X X
Borrowing X X X X X X
Lending X X X X X X
Portfolio
Securities
Repurchase X X X X X X
Agreements
Reverse
Repurchase X X
Agreements
Dollar Rolls X
Illiquid X X X X X X
Securities
Rule 144A X X X X X X
Securities
Unseasoned X X X
Issuers
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FUND AIM AIM AIM AIM AIM AIM AIM AIM AIM
AGGRESSIVE BLUE CAPITAL CHARTER CONSTELLATION CORE DENT DIVERSIFIED EMERGING
GROWTH CHIP DEVELOPMENT FUND FUND STRATEGIES DEMOGRAPHIC DIVIDEND GROWTH
SECURITY/ FUND FUND FUND FUND TRENDS FUND FUND
INVESTMENT FUND
TECHNIQUE
Sale of Money
Market
Securities
Standby
Commitments
DERIVATIVES
Equity-Linked X X X X X X X X X
Derivatives
Put Options X X X X X X X X X
Call Options X X X X X X X X X
Straddles X X X X X X X X X
Warrants X X X X X X X X X
Futures X X X X X X X X X
Contracts and
Options on
Futures
Contracts
Forward X X X X X X X X X
Currency
Contracts
Cover X X X X X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Special X
Situations
Privatizations
Commercial
Bank
Obligations
Master Limited X
Partnerships
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FUND AIM AIM AIM AIM AIM AIM
LARGE LARGE MID SELECT U.S. WEINGARTEN
CAP CAP CAP BASIC GROWTH FUND
SECURITY/ BASIC GROWTH GROWTH VALUE FUND
INVESTMENT VALUE FUND FUND FUND
TECHNIQUE 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 X X X X X X
Contracts and
Options on
Futures
Contracts
Forward X X X X X X
Currency
Contracts
Cover X X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Special
Situations
Privatizations X
Commercial X
Bank
Obligations
Master Limited
Partnerships
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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, and AIM U.S. Growth Fund may invest up to 20% of its net 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%, except that AIM Dent Demographic Trends Fund may invest up to 10%, of their respective 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 currency 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 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 U.S. 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 Services ("Moody's") or in unrated
non-convertible corporate debt securities believed by the Fund's 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 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 in an amount equal 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 borrowings 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.
DOLLAR ROLLS. A dollar roll involves the sale by a Fund of a mortgage security to a financial institution such as a broker-dealer or a bank, with an agreement to repurchase a substantially similar (i.e., same type, coupon and maturity) security at an agreed upon price and date. The mortgage securities that are purchased will bear the same interest rate as those sold, but will generally be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, a Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for a Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. At the time the Fund enters into a dollar roll, it will segregate liquid assets having a dollar value equal to the repurchase price, and will monitor the account to ensure that such equivalent value is maintained. The Fund typically enters into dollar roll transactions to enhance the Fund's return either on an income or total return basis or to manage pre-payment risk. Dollar rolls 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 the 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 currency 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 currency 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.
PRIVATIZATIONS. AIM Select Basic Value Fund may invest in privatizations. The governments of some foreign countries have been engaged in programs of selling part or all of their stakes in government owned or controlled enterprises ("privatizations"). AIM believes that privatizations may offer opportunities for significant capital appreciation and intend to invest in privatizations in appropriate circumstances. In certain foreign countries, the ability of foreign entities to participate in privatizations may be limited by local law, or the terms on which a Fund may be permitted to participate may be less advantageous than those for local investors. There can be no assurance that foreign governments will continue to sell companies currently owned or controlled by them or that privatization programs will be successful.
COMMERCIAL BANK OBLIGATIONS. For the purpose of AIM Select Basic Value Fund's investment policies with respect to bank obligations, obligations of foreign branches of U.S. banks and of foreign banks are obligations of the issuing bank and may be general obligations of the parent bank. Such
obligations, however, may be limited by the terms of a specific obligation and by government regulation. As with investment in non-U.S. securities in general, investments in the obligations of foreign branches of U.S. banks and of foreign banks may subject the Fund to investment risks that are different in some respects from those of investments in obligations of domestic issuers. Although the Fund typically will acquire obligations issued and supported by the credit of U.S. or foreign banks having total assets at the time of purchase of $1 billion or more, this $1 billion figure is not an investment policy or restriction of the Fund. For the purposes of calculation with respect to the $1 billion figure, the assets of a bank will be deemed to include the assets of its U.S. and non-U.S. branches.
MASTER LIMITED PARTNERSHIPS ("MLPs"). AIM Diversified Dividend Fund may invest in MLPs. MLPs are securities through which the operating results of businesses are passed on to unitholders of MLPs. Operating earnings flow directly to the unitholders in the form of cash distributions. Although the characteristics of MLPs closely resemble a traditional limited partnership, a major difference is that MLPs may trade on a public exchange or in the over-the-counter market. The ability to trade on a public exchange or in the over-the-counter market provides a certain amount of liquidity not found in many limited partnership investments.
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, except AIM Emerging Growth Fund is not subject to restriction (1). 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-advisor 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, except AIM Emerging Growth Fund is not subject to restriction (1). 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 1/3% 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 1/3% 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) 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.
(3) 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.
(4) 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.
(5) AIM Diversified Dividend Fund normally invests at least 80% of its assets in dividend-paying equity securities. 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.
(6) AIM U.S. Growth Fund normally invests at least 80% of its assets in core growth securities of market-leading U.S. 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.
(7) 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."
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 instruments. 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 are set forth in Appendix B.
The standing committees of the Board of Trustees are the Audit Committee, the Compliance Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Committee Relating to Market Timing issues.
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: (i) 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) assisting the Board's oversight of the Funds' compliance with legal and regulatory requirements that related 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, pre-approving all permissible non-audit services provided to the Funds by its independent auditors; (vi) pre-approving, 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, preparing 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 Compliance Committee are Frank S. Bayley, Bruce L. Crockett (Chair), Albert R. Dowden and Mr. Dunn. The Compliance Committee is responsible for: (i) recommending to the Board and the dis-interested trustees the appointment, compensation and removal of the Fund's Chief Compliance Officer; (ii) recommending to the dis-interested trustees the appointment, compensation and removal of the Fund's Senior Officer that is expected to be appointed pursuant to the terms of an Assurance of Discontinuance from the New York Attorney General that is applicable to AIM and/or INVESCO Funds Group, Inc. (the "Advisors") (the "Senior Officer"); (iii) recommending to the disinterested trustees the appointment and removal of the Advisors' independent Compliance Consultant appointed pursuant to the terms of the Securities and Exchange Commission's Order Instituting Administrative Proceedings (the "SEC Order") applicable to the Advisors (the "Compliance Consultant"); (iv) receiving all reports from the Chief Compliance Officer, the Senior Officer and the Compliance Consultant that are delivered between meetings of the Board and that are otherwise not required to be provided to the full Board or to all of the disinterested trustees; (v) overseeing all reports on compliance matters from the Chief Compliance Officer, the Senior Officer and the Compliance Consultant, and overseeing all reports from the third party retained by the Advisors to conduct the periodic compliance review required by the terms of the SEC Order that are required to be provided to the full Board; (vi) overseeing all of the compliance policies and procedures of the Fund and its service providers adopted pursuant to Rule 38a-1 of the 1940 Act; (vii) risk management oversight with respect to the Fund and, in connection therewith, receiving and overseeing risk management reports from AMVESCAP PLC that are applicable to the Fund or its service providers; and (viii) overseeing potential conflicts of interest that are reported to the Committee by the Advisors, the Chief Compliance Officer, the Senior Officer and/or the Compliance Consultant. During the fiscal year ended October 31, 2003, the Compliance Committee did not meet.
The members of the Governance Committee are Messrs. Bayley, Crockett
(Chair), Dowden, and 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 (Vice Chair), Bayley (Vice Chair), 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 Investments Committee held four meetings.
The members of the Valuation Committee are Messrs. Dunn, Pennock
(Chair) and Soll, and Miss Quigley (Vice Chair). The Valuation Committee is
responsible for addressing issues requiring action by the Board in the valuation
of the Funds' portfolio securities that arise during periods between meetings of
the Board. During periods between meetings of the Board, the Valuation
Committee: (i) receives the reports of AIM's internal valuation committee
requesting pre-approval or approval of any changes to pricing vendors or pricing
methodologies as required by AIM's Procedures for Valuing Securities (Pricing
Procedures) (the "Procedures"), and approves changes to pricing vendors and
pricing methodologies as provided in the Procedures; (ii) upon request of AIM,
assists AIM's internal valuation committee in resolving particular fair
valuation issues; and (iii) receives reports on non-standard price changes on
private equities. 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 (the "Advisory Agreement") for each Fund and the sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM Capital") for AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund (the "Sub-Advisory Agreement") (collectively with the Advisory Agreement, the "Advisory Agreements") were re-approved by the Trust's Board at a meeting held on June 7-9, 2004. In evaluating the fairness and reasonableness of the Advisory Agreements, 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 Agreements, as applicable, were in the best interests of such Fund and its shareholders and continued the agreements 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 was 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.
Purchase 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 AIM 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. For a complete description of the persons who will not
pay an initial sales charge on purchases of Class A shares of the AIM Funds, see
"Purchase, Redemption and Pricing of Shares - Purchase and Redemption of Shares
- Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money
Market Fund - Purchases of Class A Shares at Net Asset Value."
CODES OF ETHICS
AIM, the Trust, AIM Distributors, A I M Capital Management, Inc. (the "Sub-Advisor") and H.S. Dent Advisors, 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 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, and which are found in Appendix D.
Any material changes to the proxy policies and procedures will be submitted to the Board for approval. The Board will be supplied with a summary quarterly report of each Fund's proxy voting record.
Information regarding how the Funds voted proxies related to its portfolio securities during the 12 months ended June 30, 2004 is available at our Website, AIMinvestments.com. This information is also available at the SEC Website, http://www.sec.gov.
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 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 believed 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 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 trustee 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 Select Basic Value Fund First $1 billion 0.75%
AIM U.S. Growth Fund Next $1 billion 0.70%
Amount over $2 billion 0.65%
AIM Core Strategies Fund First $1 billion 0.75%
AIM Diversified Dividend Fund Next $1 billion 0.70%
Amount over $2 billion 0.625%
AIM Dent Demographic Trends Fund First $2 billion 0.77%
Amount over $2 billion 0.72%
AIM Emerging Growth Fund First $1 billion 0.85%
Amount over $1 billion 0.80%
AIM Large Cap Basic Value Fund First $1 billion 0.60%
Next $1 billion 0.575%
Amount over $2 billion 0.55%
AIM Large Cap Growth Fund First $1 billion 0.75%
Next $1 billion 0.70%
Amount over $2 billion 0.625%
AIM Mid Cap Growth Fund First $1 billion 0.80%
Amount over $1 billion 0.75%
AIM Weingarten Fund First $30 million 1.00%
Next $320 million 0.75%
Amount over $350 million 0.625%
|
* 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."
AIM has contractually agreed through October 31, 2004 to waive fees and/or reimburse expenses (excluding interest, taxes, dividends on short sales, fund merger and reorganization expenses, including other items designated as such by the Board of Trustees, and increases in expenses due to expense offset arrangements, if any) for AIM Diversified Dividend Fund's Class A, Class B and Class C shares to the extent necessary to limit the total operating expenses of Class A shares to 1.50% (e.g., if AIM waives 0.61% of Class A expenses, AIM will also waive 0.61% of Class B and Class C expenses).
INVESTMENT SUB-ADVISOR
AIM has entered into a Sub-Advisory Agreement with 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 Sub-Advisory Agreement, 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.
AIM has entered into a Master Sub-Advisory Agreement with H.S. Dent Advisors, Inc. ("Dent Advisors") to provide investment sub-advisory services to AIM Dent Demographic Trends Fund. Dent Advisors is registered as an investment advisor under the Advisers Act. The Fund is managed by investment managers who utilize Dent Advisors' research and analysis regarding economic and demographic trends.
For the services to be rendered by Dent Advisors under its Master Sub-Advisory Agreement, the Advisor will pay to Dent Advisors a fee which will be computed daily and paid as of the last day of each month. On an annual basis, the sub-advisory fee is 6.49% of the net management fee for the Fund; however, no sub-advisory fee shall be due with respect to the Fund if the net assets of such Fund fall below $50 million.
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.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), 800 Scudders Mill Road, Plainsboro, New Jersey 08536 has entered into an agreement with the Trust (and certain other AIM Funds), PFPC Inc. (formerly known as First Data Investor Service Group) and Financial Data Services, Inc., pursuant to which MLPF&S is paid a per account fee to perform certain shareholder sub-accounting services for its customers who beneficially own shares of the Fund(s).
Primerica Shareholder Services, Inc. ("PSS"), 3120 Breckinridge Boulevard, Duluth, Georgia 30099-0001 has also entered into an agreement with the Trust (and certain other AIM Funds) and AIS pursuant to which PSS is paid a per account fee to perform certain shareholder sub-accounting services for its customers who beneficially own shares of the Fund(s).
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 19103-7599.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Each Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, each Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM and/or the Sub-Advisor(s) 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 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 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 brokerage 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. Portfolio transactions also may be effected through broker-dealers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients. AIM will not enter into a binding commitment with brokers to place trades with such brokers involving brokerage commissions in precise amounts.
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 40 basis point allocation (founded 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
Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund
INITIAL SALES CHARGES. Each AIM Fund (other than AIM Tax-Exempt Cash Fund and AIM Money Market Fund) is grouped into one of three categories to determine the applicable initial sales charge for its Class A Shares. The sales charge is used to compensate AIM Distributors and participating dealers for their expenses incurred in connection with the distribution of the Funds' shares. You may also be charged a transaction or other fee by the financial institution managing your account.
Class A shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund are sold without an initial sales charge.
CATEGORY I FUNDS
AIM Aggressive Growth Fund AIM Large Cap Basic Value Fund AIM Asia Pacific Growth Fund AIM Large Cap Growth Fund AIM Basic Value Fund AIM Libra Fund AIM Blue Chip Fund AIM Mid Cap Basic Value Fund AIM Capital Development Fund AIM Mid Cap Core Equity Fund AIM Charter Fund AIM Mid Cap Growth Fund AIM Constellation Fund AIM Opportunities I Fund AIM Dent Demographic Trends Fund AIM Opportunities II Fund AIM Diversified Dividend Fund AIM Opportunities III Fund AIM Emerging Growth Fund AIM Premier Equity Fund AIM European Growth Fund AIM Select Equity Fund AIM European Small Company Fund AIM Small Cap Equity Fund AIM Global Value Fund AIM Small Cap Growth Fund AIM International Emerging Growth Fund AIM Weingarten Fund |
Dealer
Investor's Sales Charge Concession
------------------------- -----------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
--------------------------------- ------------- ----------- -------------
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
|
(1) AIM Opportunities I Fund will not accept any single purchase in excess of $250,000.
CATEGORY II FUNDS
AIM Balanced Fund AIM High Income Municipal Fund AIM Basic Balanced Fund AIM High Yield Fund AIM Developing Markets Fund AIM Income Fund AIM Global Aggressive Growth Fund AIM Intermediate Government Fund AIM Global Equity Fund AIM Municipal Bond Fund AIM Global Growth Fund AIM Real Estate Fund AIM Global Health Care Fund AIM Total Return Bond Fund |
Dealer
Investor's Sales Charge Concession
-------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
--------------------------------- ------------- ------------ -------------
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
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CATEGORY III FUNDS
AIM Limited Maturity Treasury Fund
AIM Tax-Free Intermediate Fund
Dealer
Investor's Sales Charge Concession
-------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
--------------------------------- ------------- ---------- -------------
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
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Beginning on October 31, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors. Current investors must maintain a share balance in order to continue to make incremental purchases.
LARGE PURCHASES OF CLASS A SHARES. Investors who purchase $1,000,000 or more of Class A Shares of a Category I, II or III Fund do not pay an initial sales charge. In addition, investors who currently own Class A shares of Category I, II, or III Funds and make additional purchases that result in account balances of $1,000,000 or more do not pay an initial sales charge on the additional purchases. The additional purchases, as well as initial purchases of $1,000,000 or more, are referred to as Large Purchases. If an investor makes a Large Purchase of Class A shares of a Category I or II Fund, however, each share issued will generally be subject to a 1.00% contingent deferred sales charge ("CDSC") if the investor redeems those shares within 18 months after purchase. Large Purchases of Class A shares of Category III Funds made on or after November 15, 2001 and through October 30, 2002 will be subject to a 0.25% CDSC if the investor redeems those shares within 12 months after purchase.
AIM Distributors may pay a dealer concession and/or advance a service fee on Large Purchases, as set forth below. Exchanges between the AIM Funds may affect total compensation paid.
AIM Distributors may make the following payments to dealers of record
for Large Purchases of Class A shares of Category I or II Funds by investors
other than (i) retirement plans that are maintained pursuant to Sections 401 and
457 of the Internal Revenue Code of 1986, as amended (the Code), and (ii)
retirement plans that are maintained pursuant to Section 403 of the Code if the
employer or plan sponsor is a tax-exempt organization operated pursuant to
Section 501(c)(3) of the Code:
PERCENT OF PURCHASE
1% of the first $2 million
plus 0.80% of the next $1 million
plus 0.50% of the next $17 million
plus 0.25% of amounts in excess of $20 million
If (i) the amount of any single purchase order plus (ii) the public offering price of all other shares owned by the same customer submitting the purchase order on the day on which the purchase order is received equals or exceeds $1,000,000, the purchase will be considered a "jumbo accumulation purchase." With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases made by the same customer over the life of his or her account(s).
If an investor made a Large Purchase of Class A shares of a Category III Fund on and after November 15, 2001 and through October 31, 2002 and exchanges those shares for Class A shares of a Category I or II Fund, AIM Distributors will pay an additional dealer concession of 0.75% upon exchange.
If an investor made a Large Purchase of Class A shares and a Category I or II Fund on and after November 15, 2001 and through October 31, 2002 exchanges those shares for Class A shares of a Category III Fund, AIM Distributors will not pay any additional dealer compensation upon the exchange. Beginning February 17, 2003, Class A shares of a Category I or II Fund may not be exchanged for Class A shares of a Category III Fund.
If an investor makes a Large Purchase of Class A3 shares of a Category III Fund on and after October 31, 2002 and exchanges those shares for Class A shares of a Category I or II Fund, AIM Distributors will pay 1.00% of such purchase as dealer compensation upon the exchange. The Class A shares of the Category I or II Fund received in exchange generally will be subject to a 1.00% CDSC if the investor redeems such shares within 18 months from the date of exchange.
If an investor makes a Large Purchase of Class A shares of a Category III Fund and exchanges those shares for Class A shares of another Category III Fund, AIM Distributors will not pay any additional dealer concession upon the exchange. Beginning February 17, 2003, Class A shares of a Category III Fund may not be exchanged for Class A shares of another Category III Fund.
PURCHASES OF CLASS A SHARES BY CERTAIN RETIREMENT PLANS AT NAV. Effective November 1, 2002, for purchases of Class A shares of Category I and II Funds, AIM Distributors may make the following payments to investment dealers or other financial service firms for sales of such shares at net asset value ("NAV") to certain retirement plans provided that the applicable dealer of record is able to establish that the retirement plan's purchase of Class A shares is a new investment (as defined below):
PERCENT OF PURCHASE
0.50% of the first $20 million
plus 0.25% of amounts in excess of $20 million
This payment schedule will be applicable to purchases of Class A shares at NAV by the following types of retirement plans: (i) all plans maintained pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant to Section 403 of the Code if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code.
A "new investment" means a purchase paid for with money that does not represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii) an exchange of AIM Fund shares, (iii) the repayment of one or more retirement plan loans that were funded through the redemption of AIM Fund shares, or (iv) money returned from another fund family. If AIM Distributors pays a dealer concession in connection with a plan's purchase of Class A shares at NAV, such shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing on the date the plan first invests in Class A shares of an AIM Fund. If the applicable dealer of record is unable to establish that a plan's purchase of Class A shares at NAV is a new investment, AIM Distributors will not pay a dealer concession in connection with such purchase and such shares will not be subject to a CDSC.
With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases made by the same plan over the life of the plan's account(s).
PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in the tables above, purchases of certain amounts of AIM Fund shares may reduce the initial sales charges. These reductions are available to purchasers that meet the qualifications listed below. We will refer to purchasers that meet these qualifications as "Qualified Purchasers."
DEFINITIONS
As used herein, the terms below shall be defined as follows:
o "Individual" refers to a person, as well as his or her Spouse or Domestic Partner and his or her Children;
o "Spouse" is the person to whom one is legally married under state law;
o "Domestic Partner" is an adult with whom one shares a primary residence for at least six-months, is in a relationship as a couple where one or each of them provides personal or financial welfare of the other without a fee, is not related by blood and is not married;
o "Child" or "Children" include a biological, adopted or foster son or daughter, a Step-child, a legal ward or a Child of a person standing in loco parentis;
o "Parent" is a person's biological or adoptive mother or father;
o "Step-child" is the child of one's Spouse by a previous marriage or relationship;
o "Step-parent" is the Spouse of a Child's Parent; and
o "Immediate Family" includes an Individual (including, as defined above, a person, his or her Spouse or Domestic Partner and his or her Children) as well as his or her Parents, Step-parents and the Parents of Spouse or Domestic Partner.
INDIVIDUALS
o an Individual (including his or her spouse or domestic partner, and children);
o a retirement plan established exclusively for the benefit of an Individual, specifically including, but not limited to, a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh plan, or a tax-sheltered 403(b)(7) custodial account; and
o a qualified tuition plan account, maintained pursuant to Section 529 of the Code, or a Coverdell Education Savings Account, maintained pursuant to Section 530 of the Code (in either case, the account must be established by an Individual or have an Individual named as the beneficiary thereof).
EMPLOYER-SPONSORED RETIREMENT PLANS
o a retirement plan maintained pursuant to Section 401, 403 (only if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP and SIMPLE IRA plans) or 457 of the Code, if:
a. the employer or plan sponsor submits all contributions for all participating employees in a single contribution transmittal (the AIM Funds will not accept separate contributions submitted with respect to individual participants);
b. each transmittal is accompanied by a single check or wire transfer; and
c. if the AIM Funds are expected to carry separate accounts in the names of each of the plan participants, (i) the employer or plan sponsor notifies AIM Distributors in writing that the separate accounts of all plan participants should be linked, and (ii) all new participant
accounts are established by submitting an appropriate Account Application on behalf of each new participant with the contribution transmittal.
HOW TO QUALIFY FOR REDUCTIONS IN INITIAL SALES CHARGES. The following sections discuss different ways that a Qualified Purchaser can qualify for a reduction in the initial sales charges for purchases of Class A shares of the AIM Funds.
LETTERS OF INTENT
A Qualified Purchaser may pay reduced initial sales charges by (i) indicating on the Account Application that he, she or it intends to provide a Letter of Intent ("LOI"), and (ii) subsequently fulfilling the conditions of that LOI.
The LOI confirms the total investment in shares of the AIM Funds that the Qualified Purchaser intends to make within the next 13 months. By marking the LOI section on the Account Application and by signing the Account Application, the Qualified Purchaser indicates that he, she or it understands and agrees to the terms of the LOI and is bound by the provisions described below:
Calculating the Initial Sales Charge
o Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI (to determine what the applicable public offering price is, look at the sales charge table in the section on "Initial Sales Charges" above).
o It is the purchaser's responsibility at the time of purchase to specify the account numbers that should be considered in determining the appropriate sales charge.
o The offering price may be further reduced as described below under "Rights of Accumulation" if the Transfer Agent is advised of all other accounts at the time of the investment.
o Shares acquired through reinvestment of dividends and capital gains distributions will not be applied to the LOI.
Calculating the Number of Shares to be Purchased
o Purchases made within 90 days before signing an LOI will be applied toward completion of the LOI. The LOI effective date will be the date of the first purchase within the 90-day period.
o Purchases made more than 90 days before signing an LOI will be applied toward the completion of the LOI based on the value of the shares purchased that is calculated at the public offering price on the effective date of the LOI.
o If a purchaser meets the original obligation at any time during the 13-month period, he or she may revise the intended investment amount upward by submitting a written and signed request. This revision will not change the original expiration date.
o The Transfer Agent will process necessary adjustments upon the expiration or completion date of the LOI.
Fulfilling the Intended Investment
o By signing an LOI, a purchaser is not making a binding commitment to purchase additional shares, but if purchases made within the 13-month period do not total the amount specified, the purchaser will have to pay the increased amount of sales charge.
o To assure compliance with the provisions of the 1940 Act, the Transfer Agent will escrow in the form of shares an appropriate dollar amount (computed to the nearest full share) out of the initial purchase (or subsequent purchases if necessary). All dividends and any capital gain distributions on the escrowed shares will be credited to the purchaser. All shares purchased, including those escrowed, will be registered in the purchaser's name. If the total investment specified under this LOI is completed within the 13-month period, the escrowed shares will be promptly released.
o If the intended investment is not completed, the purchaser will pay the Transfer Agent the difference between the sales charge on the specified amount and the sales charge on the amount actually purchased. If the purchaser does not pay such difference within 20 days of the expiration date, he or she irrevocably constitutes and appoints the Transfer Agent as his attorney to surrender for redemption any or all shares, to make up such difference within 60 days of the expiration date.
Canceling the LOI
o If at any time before completing the LOI Program, the purchaser wishes to cancel the agreement, he or she must give written notice to AIM Distributors.
o If at any time before completing the LOI Program the purchaser requests the Transfer Agent to liquidate or transfer beneficial ownership of his total shares, the LOI will be automatically canceled. If the total amount purchased is less than the amount specified in the LOI, the Transfer Agent will redeem an appropriate number of escrowed shares equal to the difference between the sales charge actually paid and the sales charge that would have been paid if the total purchases had been made at a single time.
Other Persons Eligible for the LOI Privilege
The LOI privilege is also available to holders of the Connecticut General Guaranteed Account, established for tax qualified group annuities, for contracts purchased on or before June 30, 1992.
LOIs and Contingent Deferred Sales Charges
If an investor entered into an LOI to purchase $1,000,000 or more of Class A shares of a Category III Fund on and after November 15, 2001 and through October 30, 2002, such shares will be subject to a 12-month, 0.25% CDSC. Purchases of Class A shares of a Category III Fund made pursuant to an LOI to purchase $1,000,000 or more of shares entered into prior to November 15, 2001 or after October 30, 2002 will not be subject to this CDSC. All LOIs to purchase $1,000,000 or more of Class A shares of Category I and II Funds are subject to an 18-month, 1% CDSC.
RIGHTS OF ACCUMULATION
A Qualified Purchaser may also qualify for reduced initial sales charges based upon his, her or its existing investment in shares of any of the AIM Funds at the time of the proposed purchase. To determine whether or not a reduced initial sales charge applies to a proposed purchase, AIM Distributors takes into account not only the money which is invested upon such proposed purchase, but also the value of all shares of the AIM Funds owned by such purchaser, calculated at their then current public offering price.
If a purchaser qualifies for a reduced sales charge, the reduced sales charge applies to the total amount of money being invested, even if only a portion of that amount exceeds the breakpoint for the reduced sales charge. For example, if a purchaser already owns qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000 in a fund with a maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will apply to the full $20,000 purchase and not just to the $15,000 in excess of the $25,000 breakpoint.
To qualify for obtaining the discount applicable to a particular purchase, the purchaser or his dealer must furnish the Transfer Agent with a list of the account numbers and the names in which such accounts of the purchaser are registered at the time the purchase is made.
Rights of Accumulation are also available to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
If an investor's new purchase of Class A shares of a Category I or II Fund is at net asset value, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the 18 month holding period (12 months for Category III Fund shares). For new purchases of Class A shares of Category III Funds at net asset value made on and after November 15, 2001 and through October 30, 2002, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the end of the 12 month holding period.
OTHER REQUIREMENTS FOR REDUCTIONS IN INITIAL SALES CHARGES. As discussed above, investors or dealers seeking to qualify orders for a reduced initial sales charge must identify such orders and, if necessary, support their qualification for the reduced charge. AIM Distributors reserves the right to determine whether any purchaser is entitled to the reduced sales charge based on the definition of a Qualified Purchaser listed above. No person or entity may distribute shares of the AIM Funds without payment of the applicable sales charge other than to Qualified Purchasers.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund, and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any Fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE. AIM Distributors permits certain categories of persons to purchase Class A shares of AIM Funds without paying an initial sales charge. These are typically categories of persons whose transactions involve little expense, such as persons who have a relationship with the funds or with AIM and certain programs for purchase.
AIM Distributors believes that it is appropriate and in the Funds' best interests that such persons, and certain other persons whose purchases result in relatively low expenses of distribution, be permitted to purchase shares through AIM Distributors without payment of a sales charge.
Accordingly, the following purchasers will not pay initial sales charges on purchases of Class A shares because there is a reduced sales effort involved in sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members of their Immediate Family) of AIM Management, its affiliates or The AIM Family of Funds(R), and any foundation, trust or employee benefit plan established exclusively for the benefit of, or by, such persons;
o Any current or retired officer, director, or employee (and members of their Immediate Family) of DST Systems, Inc. or Personix, a division of Fiserv Solutions, Inc.;
o Sales representatives and employees (and members of their Immediate Family) of selling group members of financial institutions that have arrangements with such selling group members;
o Purchases through approved fee-based programs;
o Employer-sponsored retirement plans that are Qualified Purchasers, as defined above provided that:
a. a plan's initial investment is at least $1 million;
b. there are at least 100 employees eligible to participate in the plan; or
c. all plan transactions are executed through a single omnibus account per AIM Fund and the financial institution or service organization has entered into the appropriate agreement with the distributor; further provided that
d. retirement plans maintained pursuant to Section 403(b) of the Code are not eligible to purchase shares at NAV based on the aggregate investment made by the plan or the number of eligible employees unless the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code; and
e. purchases of AIM Opportunities I Fund by all retirement plans are subject to initial sales charges;
o Shareholders of record of Advisor Class shares of AIM International Growth Fund or AIM Worldwide Growth Fund on February 12, 1999 who have continuously owned shares of the AIM Funds;
o Shareholders of record or discretionary advised clients of any investment advisor holding shares of AIM Weingarten Fund or AIM Constellation Fund on September 8, 1986, or of AIM Charter Fund on November 17, 1986, who have continuously owned shares having a market value of at least $500 and who purchase additional shares of the same Fund;
o Unitholders of G/SET series unit investment trusts investing proceeds from such trusts in shares of AIM Weingarten Fund or AIM Constellation Fund; provided, however, prior to the termination date of the trusts, a unitholder may invest proceeds from the redemption or repurchase of his units only when the investment in shares of AIM Weingarten Fund and AIM Constellation Fund is effected within 30 days of the redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM Fund or that sells its assets to an AIM Fund in exchange for shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who since that date continually have owned shares of one or more of these funds;
o Certain former AMA Investment Advisers' shareholders who became shareholders of the AIM Global Health Care Fund in October 1989, and who have continuously held shares in the GT Global funds since that time;
o Shareholders of record of Advisor Class shares of an AIM Fund on February 11, 2000 who have continuously owned shares of that AIM Fund, and who purchase additional shares of that AIM Fund;
o Shareholders of Investor Class shares of an AIM Fund;
o Qualified Tuition Programs created and maintained in accordance with
Section 529 of the Code;
o Initial purchases made by Qualified Purchasers, as defined above, within one (1) year after the registered representative who services their account(s) has become affiliated with a selling group member with which AIM Distributors has entered into a written agreement; and
o Participants in select brokerage programs for retirement plans and rollover IRAs who purchase shares through an electronic brokerage platform offered by entities with which AIM Distributors has entered into a written agreement.
In addition, an investor may acquire shares of any of the AIM Funds at net asset value in connection with:
o the reinvestment of dividends and distributions from a Fund;
o exchanges of shares of certain Funds; or
o a merger, consolidation or acquisition of assets of a Fund.
PAYMENTS TO DEALERS. AIM Distributors may elect to re-allow the entire initial sales charge to dealers for all sales with respect to which orders are placed with AIM Distributors during a particular period. Dealers to whom substantially the entire sales charge is re-allowed may be deemed to be "underwriters" as that term is defined under the 1933 Act.
In addition to, or instead of, amounts paid to dealers as a sales commission, AIM Distributors may, from time to time, at its expense out of its own financial resources or as an expense for which it may be compensated or reimbursed by an AIM Fund under a distribution plan, if applicable, make cash payments to dealer firms as an incentive to sell shares of the funds and/or to promote retention of their customers' assets in the funds. Such cash payments may be calculated on sales of shares of AIM Funds ("Sales-Based Payments"), in which case the total amount of such payments shall not exceed 0.25% of the public offering price of all shares sold by the dealer firm during the applicable period. Such cash payments also may be calculated on the average daily net assets of the applicable AIM Fund(s) attributable to that particular dealer ("Asset-Based Payments'), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. AIM Distributors may agree to make such cash payments to a dealer firm in the form of either or both Sales-Based Payments and Asset-Based Payments. AIM Distributors may also make other cash payments to dealer firms in addition to or in lieu of Sales-Based Payments and Asset-Based Payments, in the form of payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives of those dealer firms and their families to places within or outside the United States; meeting fees; entertainment; transaction processing and transmission charges; advertising or other promotional expenses; or other amounts as determined in AIM Distributor's discretion. In certain cases these other payments could be significant to the dealer firms. To the extent dealer firms sell more shares of the Funds or cause clients to retain their investment in the Funds, AIM benefits from management and other fees it is paid with respect to those assets. Any payments described above will not change the price paid by investors for the purchase of the applicable AIM Fund's shares or the amount that any particular AIM Fund will receive as proceeds from such sales. AIM Distributors determines the cash payments described above in its discretion in response to requests from dealer firms, based on factors it deems relevant. Dealers may not use sales of the AIM Funds' shares to qualify for any incentives to the extent that such incentives may be prohibited by the laws of any state.
Purchases of Class B Shares
Class B shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within six years after purchase. See the Prospectus for additional information regarding contingent deferred sales charges. AIM Distributors may pay sales commissions to dealers and institutions who sell Class B shares of the AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase price and will consist of a sales commission equal to 3.75% plus an advance of the first year service fee of 0.25%.
Purchases of Class C Shares
Class C shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within the first year after purchase (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund). See the Prospectus for additional information regarding this CDSC. AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds (except for Class C shares of AIM Short Term Bond Fund) at the time of such sales. Payments will equal 1.00% of the purchase price and will consist of a sales commission of 0.75% plus an advance of the first year service fee of 0.25%. These commissions are not paid on sales to investors exempt from the CDSC, including shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who purchase additional shares in any of the Funds on or after May 1, 1995, and in circumstances where AIM Distributors grants an exemption on particular transactions.
AIM Distributors may pay dealers and institutions who sell Class C shares of AIM Short Term Bond Fund an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence immediately.
Purchases of Class R Shares
Class R shares are sold at net asset value, and are not subject to an initial sales charge. If AIM Distributors pays a concession to the dealer of record, however, the Class R shares are subject to a 0.75% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the retirement plan's initial purchase. For purchases of Class R shares of Category I or II Funds, AIM Distributors may make the following payments to dealers of record provided that the applicable dealer of record is able to establish that the purchase of Class R shares is a new investment or a rollover from a retirement plan in which an AIM Fund was offered as an investment option:
PERCENT OF CUMULATIVE PURCHASES
0.75% of the first $5 million
plus 0.50% of amounts in excess of $5 million
With regard to any individual purchase of Class R shares, AIM Distributors may make payment to the dealer of record based on the cumulative total of purchases made by the same plan over the life of the plan's account(s).
Purchases of Investor Class Shares
Investor Class shares are sold at net asset value, and are not subject to an initial sales charge or to a CDSC. AIM Distributors may pay dealers and institutions an annual fee of 0.25% of average daily net assets and such payments will commence immediately.
Exchanges
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be acquired by exchange are purchased at their net asset value or applicable offering price, as the case may be, determined on the date that such request is received, but under unusual market conditions such purchases may be delayed for up to five business days if it is determined that a fund would be materially disadvantaged by an immediate transfer of the proceeds of the exchange. If a shareholder is exchanging into a fund paying daily dividends, and the release of the exchange proceeds is delayed for the foregoing five-day period, such shareholder will not begin to accrue dividends until the sixth business day after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain dealers and investment advisory firms to accept telephone instructions to exchange shares between any of the AIM Funds. AIM Distributors reserves the right to impose conditions on dealers or investment advisors who make telephone exchanges of shares of the funds, including the condition that any such dealer or investment advisor enter into an agreement (which contains additional conditions with respect to exchanges of shares) with AIM Distributors. To exchange shares by telephone, a shareholder, dealer or investment advisor who has satisfied the foregoing conditions must call AIS at (800) 959-4246. If a shareholder is unable to reach AIS by telephone, he may also request exchanges by fax, telegraph or use overnight courier services to expedite exchanges by mail, which will be effective on the business day received by AIS as long as such request is received prior to the close of the customary trading session of the New York Stock Exchange ("NYSE"). AIS and AIM Distributors may in certain cases be liable for losses due to unauthorized or fraudulent transactions if they do not follow reasonable procedures for verification of telephone transactions. Such reasonable procedures may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transaction.
Redemptions
GENERAL. Shares of the AIM Funds may be redeemed directly through AIM Distributors or through any dealer who has entered into an agreement with AIM Distributors. In addition to the Funds' obligation to redeem shares, AIM Distributors may also repurchase shares as an accommodation to shareholders. To effect a repurchase, those dealers who have executed Selected Dealer Agreements with AIM Distributors must phone orders to the order desk of the Funds at (800) 959-4246 and guarantee delivery of all required documents in good order. A repurchase is effected at the net asset value per share of the applicable Fund next determined after the repurchase order is received. Such an arrangement is subject to timely receipt by AIS, the Funds' transfer agent, of all required documents in good order. If such documents are not received within a reasonable time after the order is placed, the order is subject to cancellation. While there is no charge imposed by a Fund or by AIM Distributors (other than any applicable contingent deferred sales charge) when shares are redeemed or repurchased, dealers may charge a fair service fee for handling the transaction.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the date of payment postponed when (a) trading on the NYSE is restricted, as determined by applicable rules and regulations of the SEC, (b) the NYSE is closed for other than customary weekend and holiday closings, (c) the SEC has by order permitted such suspension, or (d) an emergency as determined by the SEC exists making disposition of portfolio securities or the valuation of the net assets of a Fund not reasonably practicable.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an investor appoints AIS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AIS in the designated account(s), present or future, with full power of substitution in the premises. AIS and AIM Distributors are thereby authorized and directed to accept and act upon any telephone redemptions of shares held in any of the account(s) listed, from any person who requests the redemption. An investor acknowledges by signing the form that he understands and agrees that AIS and AIM Distributors may not be liable for any loss, expense or cost arising out of any telephone redemption requests effected in accordance with the authorization set forth in these instructions if they reasonably believe such request to be genuine, but may in certain cases be liable for losses due to unauthorized or fraudulent transactions. Procedures for verification of telephone transactions may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transactions. AIS reserves the right to cease to act as attorney-in-fact subject to this appointment, and AIM Distributors reserves the right to modify or terminate the telephone redemption privilege at any time without notice. An investor may elect not to have this privilege by marking the appropriate box on the application. Then any redemptions must be effected in writing by the investor.
SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a shareholder of an AIM Fund to withdraw on a regular basis at least $50 per withdrawal. Under a Systematic Redemption Plan, all shares are to be held by AIS and all dividends and distributions are reinvested in shares of the applicable AIM Fund by AIS. To provide funds for payments made under the Systematic Redemption Plan, AIS redeems sufficient full and fractional shares at their net asset value in effect at the time of each such redemption.
Payments under a Systematic Redemption Plan constitute taxable events. Since such payments are funded by the redemption of shares, they may result in a return of capital and in capital gains or losses, rather than in ordinary income. Because sales charges are imposed on additional purchases of shares (other than Class B, Class C or Class R Shares of the Funds), it is disadvantageous to effect such purchases while a Systematic Redemption Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic Redemption Plan.
Contingent Deferred Sales Charges Imposed upon Redemption of Shares
A CDSC may be imposed upon the redemption of Large Purchases of Class A shares of Category I and II Funds, or upon the redemption of Class B shares or Class C shares (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund) and, in certain circumstances, upon the redemption of Class R shares. See the Prospectus for additional information regarding CDSCs.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF CLASS A SHARES. An investor who has made a Large Purchase of Class A shares of a Category I, II or III Fund will not be subject to a CDSC upon the redemption of those shares in the following situations:
o Redemptions of shares of Category I or II Funds held more than 18 months;
o Redemptions of shares of Category III Funds purchased prior to November 15, 2001 or after October 30, 2002;
o Redemptions of shares of Category III Funds purchased on or after November 15, 2001 and through October 30, 2002 and held for more than 12 months;
o Redemptions of shares held by retirement plans in cases where (i) the plan has remained invested in Class A shares of an AIM Fund for at least 12 months, or (ii) the redemption is not a complete redemption of shares held by the plan;
o Redemptions from private foundations or endowment funds;
o Redemptions of shares by the investor where the investor's dealer waives the amounts otherwise payable to it by the distributor and notifies the distributor prior to the time of investment;
o Redemptions of shares of Category I, II or III Funds or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category I or II Fund, unless the shares acquired by exchange (on or after November 15, 2001 and through October 30, 2002 with respect to Category III Funds) are redeemed within 18 months of the original purchase of the exchange of Category I or II Fund shares;
o Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category III Fund purchased prior to November 15, 2001;
o Redemptions of shares of Category I or II Funds acquired by exchange from Class A shares of a Category III Fund purchased on and after November 15, 2001 and through October 30, 2002, unless the shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category III Fund shares;
o Redemption of shares of Category III Funds, shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category III Fund purchased on and after November 15, 2001 and through October 30, 2002 with respect to Category III Funds unless the shares acquired by exchange are redeemed within 12 months of the original purchase of the exchanged Category III Fund shares;
o Redemptions of shares of Category I or II Funds acquired by exchange on and after November 15, 2001 from AIM Cash Reserve Shares of AIM Money Market Fund if the AIM Cash Reserve Shares were acquired by exchange from a Category I or II Fund, unless the Category I or II Fund shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category I or II Funds shares;
o Redemptions of Category I or II Funds by retirement plan participants resulting from a total redemption of the plan assets that occurs more than one year from the date of the plan's initial purchase; and
o Redemptions of shares of Category I or II Funds held by an Investor Class shareholder.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B AND C SHARES. Investors who purchased former GT Global funds Class B shares before June 1, 1998 are subject to the following waivers from the CDSC otherwise due upon redemption:
o Total or partial redemptions resulting from a distribution following retirement in the case of a tax-qualified employer-sponsored retirement;
o Minimum required distributions made in connection with an IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other retirement plan following attainment of age 70 1/2;
o Redemptions pursuant to distributions from a tax-qualified employer-sponsored retirement plan, which is invested in the former GT Global funds, which are permitted to be made without penalty pursuant to the Code, other than tax-free rollovers or transfers of assets, and the proceeds of which are reinvested in the former GT Global funds;
o Redemptions made in connection with participant-directed exchanges between options in an employer-sponsored benefit plan;
o Redemptions made for the purpose of providing cash to fund a loan to a participant in a tax-qualified retirement plan;
o Redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of
Section 72(t)(2) of the Code, and the regulations promulgated
thereunder;
o Redemptions made in connection with a distribution from a qualified profit-sharing or stock bonus plan described in Section 401(k) of the Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon hardship of the covered employee (determined pursuant to Treasury Regulation Section 1.401(k)-1(d)(2)); and
o Redemptions made by or for the benefit of certain states, counties or cities, or any instrumentalities, departments or authorities thereof where such entities are prohibited or limited by applicable law from paying a sales charge or commission.
CDSCs will not apply to the following redemptions of Class B or Class C shares, as applicable:
o Additional purchases of Class C shares of AIM International Core Equity Fund (formerly known as AIM International Value Fund) and AIM Real Estate Fund by shareholders of record on April 30, 1995, of these Funds, except that shareholders whose broker-dealers maintain a single omnibus account with AIS on behalf of those shareholders, perform sub-accounting functions with respect to those shareholders, and are unable to segregate shareholders of record prior to April 30, 1995, from shareholders whose accounts were opened after that date will be subject to a CDSC on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of (1) any registered shareholders on an account or (2) a settlor of a living trust, of shares held in the account at the time of death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts, Section
403(b) retirement plans, Section 457 deferred compensation plans and
Section 401 qualified plans, where redemptions result from (i) required
minimum distributions to plan participants or beneficiaries who are age
70 1/2 or older, and only with respect to that portion of such
distributions that does not exceed 12% annually of the participant's or
beneficiary's account value in a particular AIM Fund; (ii) in kind
transfers of assets where the participant or beneficiary notifies the
distributor of the transfer no later than the time the transfer occurs;
(iii) tax-free rollovers or transfers of assets to another plan of the
type described above invested in Class B or Class C shares of one or
more of the AIM Funds; (iv) tax-free returns of excess contributions or
returns of excess deferral amounts; and (v) distributions on the death
or disability (as defined in the Code) of the participant or
beneficiary;
o Amounts from a Systematic Redemption Plan of up to an annual amount of 12% of the account value on a per fund basis, at the time the withdrawal plan is established, provided the investor reinvests his dividends;
o Liquidation by the AIM Fund when the account value falls below the minimum required account size of $500; and
o Investment account(s) of AIM and its affiliates.
CDSCs will not apply to the following redemptions of Class C shares:
o A total or partial redemption of shares where the investor's dealer of record notified the distributor prior to the time of investment that the dealer would waive the upfront payment otherwise payable to him;
o A total or partial redemption which is necessary to fund a distribution
requested by a participant in a retirement plan maintained pursuant to
Section 401, 403, or 457 of the Code;
o Redemptions of Class C shares of an AIM Fund other than AIM Short Term Bond Fund if you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund; and
o Redemptions of Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC.
CDSCs will not apply to the following redemptions of Class R shares:
o Class R shares where the retirement plan's dealer of record notifies the distributor prior to the time of investment that the dealer waives the upfront payment otherwise payable to him; and
o Redemptions of shares held by retirement plans in cases where (i) the plan has remained invested in Class R shares of an AIM Fund for at least 12 months, or (ii) the redemption is not a complete redemption of all Class R shares held by the plan.
General Information Regarding Purchases, Exchanges and Redemptions
GOOD ORDER. Purchase, exchange and redemption orders must be received in good order. To be in good order, an investor must supply AIS with all required information and documentation, including signature guarantees when required. In addition, if a purchase of shares is made by check, the check must be received in good order. This means that the check must be properly completed and signed, and legible to AIS in its sole discretion.
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer or other financial intermediary to ensure that all orders are transmitted on a timely basis to AIS. Any loss resulting from the failure of the dealer or financial intermediary to submit an order within the prescribed time frame will be borne by that dealer or financial intermediary. If a check used to purchase shares does not clear, or if any investment order must be canceled due to nonpayment, the investor will be responsible for any resulting loss to an AIM Fund or to AIM Distributors.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the "Shareholder Information" section of each Fund's prospectus, signature guarantees are required in the following situations: (1) requests to transfer the registration of shares to another owner; (2) telephone exchange and telephone redemption authorization forms; (3) changes in previously designated wiring or electronic funds transfer instructions; and (4) written redemptions or exchanges of shares previously reported as lost, whether or not the redemption amount is under $250,000 or the proceeds are to be sent to the address of record. AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national securities exchanges, savings associations and any other organization, provided that such institution or organization qualifies as an "eligible guarantor institution" as that term is defined in rules adopted by the SEC, and further provided that such guarantor institution is listed in one of the reference guides contained in AIS's current Signature Guarantee Standards and Procedures, such as certain domestic banks, credit unions, securities dealers, or securities exchanges. AIS will also accept signatures with either: (1) a signature guaranteed with a medallion stamp of the STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE Medallion Signature Program, provided that in either event, the amount of the transaction involved does not exceed the surety coverage amount indicated on the medallion. For information regarding whether a particular institution or organization qualifies as an "eligible guarantor institution," an investor should contact the Client Services Department of AIS.
TRANSACTIONS BY TELEPHONE. By signing an account application form, an investor appoints AIS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AIS in the designated account(s), or in any other account with any of the AIM Funds, present or future, which has the identical registration as the designated account(s), with full power of substitution in the premises. AIS and AIM Distributors are thereby authorized and directed to accept and act upon any telephone redemptions of shares held in any of the account(s) listed, from any person who requests the redemption proceeds to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and mailing address of the shares to be purchased are identical to the registration of the shares being redeemed. An investor acknowledges by signing the form that he understands and agrees that AIS and AIM Distributors may not be liable for any loss, expense or cost arising out of any telephone exchange requests effected in accordance with the authorization set forth in these instructions if they reasonably believe such request to be genuine, but may in certain cases be liable for losses due to unauthorized or fraudulent transactions. Procedures for verification of telephone transactions may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transactions. AIS reserves the right to modify or terminate the telephone exchange privilege at any time without notice. An investor may elect not to have this privilege by marking the appropriate box on the application. Then any exchanges must be effected in writing by the investor.
INTERNET TRANSACTIONS. An investor may effect transactions in his account through the internet by establishing a Personal Identification Number (PIN). By establishing a PIN, the investor acknowledges and agrees that neither AIS nor AIM Distributors will be liable for any loss, expense or cost arising out of any internet transaction effected by them in accordance with any instructions submitted by a user who transmits the PIN as authentication of his or her identity. Procedures for verification of internet transactions include requests for confirmation of the shareholder's personal identification number and mailing of confirmations promptly after the transactions. The investor also acknowledges that the ability to effect internet transactions may be terminated at any time by the AIM Funds.
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
The following formula may be used to determine the public offering price per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price ) = Offering Price.
For example, at the close of business on October 31, 2002, AIM Aggressive Growth Fund - Class A shares had a net asset value per share of $7.30. The offering price, assuming an initial sales charge of 5.50%, therefore was $7.72.
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, except for AIM Diversified Dividend 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, except for AIM Diversified Dividend Fund as noted below. In the case of AIM Diversified Dividend Fund, it is the policy to declare and pay quarterly net investment income dividends and declare and pay annually any capital gain distributions. 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 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.
Dividends on Class B and Class C shares are expected to be lower than those for Class A shares because of higher distribution fees paid by Class B and Class C shares. Dividends on Class R shares may be lower than those for Class A shares, depending on whether the Class R shares pay higher distribution fees than those for Class A shares. Other class-specific expenses may also affect dividends on shares of those classes. Expenses attributable to a particular class ("Class Expenses") include distribution plan expenses, which must be allocated to the class for which they are incurred. Other expenses may be allocated as Class Expenses, consistent with applicable legal principles under the 1940 Act and the Code.
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 gains 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 or 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 of 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.
Under an IRS revenue procedure, a Fund may treat its position as lender under a repurchase agreement as a U.S. Government security for purposes of the Asset Diversification where the repurchase agreement is fully collateralized (under applicable SEC standards) with securities that constitute U.S. Government securities.
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. In certain cases, a fund may make an election to treat such gain or 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, qualified dividend 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. The Funds are permitted to invest in foreign equity securities and thus 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 noncorporate 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. 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 forward) 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 dividends 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.
If a shareholder (a) incurs a sales load in acquiring shares of a Fund,
(b) disposes of such shares less than 91 days after they are acquired, and (c)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of, but shall be treated as incurred on the
acquisition of the shares subsequently acquired. The wash sale rules may also
limit the amount of loss that may be taken into account on disposition after
such adjustment.
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 the Foreign Tax Election, 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 September 15, 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
DISTRIBUTION PLANS
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Class A shares, Class B shares, Class C shares, Class R shares and Investor Class shares, if applicable (collectively the "Plans").
Each Fund, pursuant to its Class A, Class B, Class C, Class R and, with respect to AIM Blue Chip Fund, AIM Capital Development Fund and AIM Large Cap Basic Value Fund, Investor Class Plans, pays AIM Distributors compensation at the annual rate, shown immediately below, of the Fund's average daily net assets of the applicable class.
INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS
---- ------- ------- ------- ------- --------
AIM Aggressive Growth Fund 0.25% 1.00% 1.00% 0.50% N/A
AIM Blue Chip Fund 0.35% 1.00% 1.00% 0.50% 0.25%
AIM Capital Development Fund 0.35% 1.00% 1.00% 0.50% 0.25%
AIM Charter Fund 0.30% 1.00% 1.00% 0.50% N/A
AIM Constellation Fund 0.30% 1.00% 1.00% 0.50% N/A
AIM Core Strategies Fund 0.35% 1.00% 1.00% N/A N/A
AIM Dent Demographic Trends Fund 0.35% 1.00% 1.00% N/A N/A
AIM Diversified Dividend Fund 0.35% 1.00% 1.00% N/A N/A
AIM Emerging Growth Fund 0.35% 1.00% 1.00% N/A N/A
AIM Large Cap Basic Value Fund 0.35% 1.00% 1.00% 0.50% 0.25%
AIM Large Cap Growth Fund 0.35% 1.00% 1.00% 0.50% N/A
AIM Mid Cap Growth Fund 0.35% 1.00% 1.00% 0.50% N/A
AIM Select Basic Value Fund 0.35% 1.00% 1.00% N/A N/A
AIM U.S. Growth Fund 0.35% 1.00% 1.00% N/A N/A
AIM Weingarten Fund 0.30% 1.00% 1.00% 0.50% N/A
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AIM Large Cap Growth Fund, pursuant to its Investor Class Plan, pay AIM Distributors an amount necessary to reimburse AIM Distributors for its actual allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of the Investor Class shares of the Fund.
All of the Plans compensate or reimburse AIM Distributors, as applicable, for the purpose of financing any activity which is primarily intended to result in the sale of shares of the Funds. Such activities include, but are not limited to, the following: printing of prospectuses and statements of additional information and reports for other than existing shareholders; overhead; preparation and distribution of advertising material and sales literature; expenses of organizing and conducting sales seminars; supplemental payments to dealers and other institutions such as asset-based sales charges or as payments of service fees under shareholder service arrangements; and costs of administering each Plan.
Amounts payable by a Fund under the Class A, Class B, Class C, Class R and, with respect to AIM Blue Chip Fund, AIM Capital Development Fund and AIM Large Cap Basic Value Fund, Investor Class Plans need not be directly related to the expenses actually incurred by AIM Distributors on behalf of each Fund. These Plans do not obligate the Funds to reimburse AIM Distributors for the actual allocated share of expenses AIM Distributors may incur in fulfilling its obligations under these Plans. Thus, even if AIM Distributors' actual allocated share of expenses exceeds the fee payable to AIM Distributors at any given time, under these Plans the Funds will not be obligated to pay more than that fee. If AIM Distributors' actual allocated share of expenses is less than the fee it receives, under these Plans AIM Distributors will retain the full amount of the fee.
Amounts payable by AIM Large Cap Growth Fund under its Investor Class Plan are directly related to the expenses incurred by AIM Distributors on behalf of the Fund, as this Plan obligates the Fund to reimburse AIM Distributors for its actual allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of the Investor Class shares of the Fund. If AIM Distributors' actual allocated share of expenses incurred pursuant to the Investor Class Plan for the period exceeds the 0.25% annual cap, under this Plan AIM Large Cap Growth Fund will not be obligated to pay more than the 0.25% annual cap. If AIM Distributors' actual allocated share of expenses incurred pursuant to the Investor Class Plan for the period is less than the 0.25% annual cap, under this Plan AIM Distributors is entitled to be reimbursed only for its actual allocated share of expenses.
AIM Distributors may from time to time waive or reduce any portion of its 12b-1 fee for Class A, Class C, Class R or Investor Class shares. 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 Distributors 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 Distributors and the Fund.
The Funds may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R and Investor Class shares attributable to the customers of selected dealers and financial institutions to such dealers and financial institutions, including AIM Distributors, acting as principal, who furnish continuing personal shareholder services to their customers who purchase and own the applicable class of shares of the Fund. Under the terms of a shareholder service agreement, such personal shareholder services include responding to customer inquiries and providing customers with information about their investments. Any amounts not paid as a service fee under each Plan would constitute an asset-based sales charge.
AIM Distributors may pay dealers and institutions who sell Class R shares an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence either on the thirteenth month after the first purchase, on accounts on
which a dealer concession was paid, or immediately, on accounts on which a dealer concession was not paid. If AIM Distributors pays a dealer concession, it will retain all payments received by it relating to Class R shares for the first year after they are purchased. AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class R shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record.
Under a Shareholder Service Agreement, a Fund agrees to pay periodically fees to selected dealers and other institutions who render the foregoing services to their customers. The fees payable under a Shareholder Service Agreement will be calculated at the end of each payment period for each business day of the Funds during such period at the annual rate specified in each agreement based on the average daily net asset value of the Funds' shares purchased or acquired through exchange. Fees shall be paid only to those selected dealers or other institutions who are dealers or institutions of record at the close of business on the last business day of the applicable payment period for the account in which such Fund's shares are held.
Selected dealers and other institutions entitled to receive compensation for selling Fund shares may receive different compensation for selling shares of one particular class over another. Under the Plans, certain financial institutions which have entered into service agreements and which sell shares of the Funds on an agency basis, may receive payments from the Funds pursuant to the respective Plans. AIM Distributors does not act as principal, but rather as agent for the Funds, in making dealer incentive and shareholder servicing payments to dealers and other financial institutions under the Plans. These payments are an obligation of the Funds and not of AIM Distributors.
Payments pursuant to the Plans are subject to any applicable limitations imposed by rules of the National Association of Securities Dealers, Inc. ("NASD").
See Appendix J for a list of the amounts paid by each class of shares of each Fund to AIM Distributors pursuant to the Plans for the year, or period, ended October 31, 2003 and Appendix K for an estimate by category of the allocation of actual fees paid by each class of shares of each Fund pursuant to its respective distribution plan for the year or period ended October 31, 2003.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service Agreements were approved by the Board of Trustees, including a majority of the trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plans or in any agreements related to the Plans (the "Rule 12b-1 Trustees"). In approving the Plans in accordance with the requirements of Rule 12b-1, the trustees considered various factors and determined that there is a reasonable likelihood that the Plans would benefit each class of the Funds and its respective shareholders.
The anticipated benefits that may result from the Plans with respect to each Fund and/or the classes of each Fund and its shareholders include but are not limited to the following: (1) rapid account access; (2) relatively predictable flow of cash; and (3) a well-developed, dependable network of shareholder service agents to help to curb sharp fluctuations in rates of redemptions and sales, thereby reducing the chance that an unanticipated increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans continue from year to year as long as such continuance is specifically approved, in person, at least annually by the Board of Trustees, including a majority of the Rule 12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by the vote of a majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution expenses paid by the applicable class requires shareholder approval; otherwise, the Plans may be amended by the trustees, including a majority of the Rule 12b-1 Trustees, by votes cast in person at a meeting called for the
purpose of voting upon such amendment. As long as the Plans are in effect, the selection or nomination of the Independent Trustees is committed to the discretion of the Independent Trustees.
The Class B Plan obligates Class B shares to continue to make payments to AIM Distributors following termination of the Class B shares Distribution Agreement with respect to Class B shares sold by or attributable to the distribution efforts of AIM Distributors or its predecessors, unless there has been a complete termination of the Class B Plan (as defined in such Plan) and the Class B Plan expressly authorizes AIM Distributors to assign, transfer or pledge its rights to payments pursuant to the Class B Plan.
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 other broker-dealers 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.
AIM Distributors expects to pay sales commissions from its own resources to dealers and institutions who sell Class B and Class C shares of the Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.00% of the purchase price of the Class B shares sold by the dealer or institution, and will consist of a sales commission equal to 3.75% of the purchase price of the Class B shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. The portion of the payments to AIM Distributors under the Class B Plan which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of such sales commissions plus financing costs. In the future, if multiple distributors serve a Fund, each such distributor (or its assignee or transferee) would receive a share of the payments under the Class B Plan based on the portion of the Fund's Class B shares sold by or attributable to the distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds at the time of such sales. Payments with respect to Class C shares will equal 1.00% of the purchase price of the Class C shares sold by the dealer or institution, and will consist of a sales commission of 0.75% of the purchase price of the Class C shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. AIM Distributors will retain all payments received by it relating to Class C shares for the first year after they are purchased. The portion of the payments to AIM Distributors under the Class A, Class C and Class R Plan attributable to Class C shares which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of the sales commissions to dealers plus financing costs, if any. After the first full year, AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class C shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record. These payments will consist of an asset-based sales charge of 0.75% and a service fee of 0.25%.
The Trust (on behalf of any class of any Fund) or AIM Distributors may terminate the Distribution Agreements on 60 days' written notice without penalty. The Distribution Agreements will terminate automatically in the event of their assignment. In the event the Class B shares Distribution Agreement is terminated, AIM Distributors would continue to receive payments of asset-based distribution fees in respect of the outstanding Class B shares attributable to the distribution efforts of AIM Distributors or its predecessors; provided, however that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments to AIM Distributors. Termination of the Class B Plan or the Distribution Agreement for Class B shares would not affect the obligation of Class B shareholders to pay CDSCs.
Total sales charges (front end and CDSCs) paid in connection with the sale of shares of each class of each Fund, if applicable, for the last three fiscal years ended October 31 are found in Appendix L.
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 Class A, Class B, Class C, Class R and Investor Class shares, if applicable, for the one, five and ten year periods (or since inception if less than ten years) ended April 30 are found in Appendix M.
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. Standardized total return for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; (3) Class R shares does not reflect a deduction of any sales charge since that class is generally sold and redeemed at net asset value and (4) Investor Class shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value.
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.
|
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.
|
The cumulative total returns for each Fund, with respect to its Class A, Class B, Class C and Class R and Investor Class shares, if applicable, for the one, five and ten year periods (or since inception if less than ten years) ended April 30 are found in Appendix M.
Calculation of Certain Performance Data
Funds offering Class R shares may use a restated or a blended performance calculation to derive certain performance data shown in this Statement of Additional Information and in each Fund's advertisements and other sales material. If the Fund's Class R shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of the Fund's Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If the Fund's Class R shares were offered to the public only during a portion of the performance period covered, the performance data shown will be the blended returns of the historical performance of the Fund's Class R shares since their inception and the restated historical performance of the Fund's Class A shares (for periods prior to inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If the Fund's Class R shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of the Fund's Class R shares.
AIM Blue Chip Fund, AIM Capital Development Fund, AIM Large Cap Basic Value Fund and AIM Large Cap Growth Fund may also use a restated or a blended performance calculation to derive certain performance data shown for each Fund's Investor Class shares in this Statement of Additional Information and in each Fund's advertisements and other sales material. If each Fund's Investor Class shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of each Fund's Class A shares at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If each Fund's Investor Class shares were offered to the public only during a portion of the performance period covered, the performance data shown will be the blended returns of the historical performance of each Fund's Investor Class shares
since their inception and the restated historical performance of each Fund's Class A shares (for periods prior to inception of the Investor Class shares) at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If each Fund's Investor Class shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of each Fund's Investor Class shares.
A restated or blended performance calculation may be used to derive (i)
each Fund's standardized average annual total returns over a stated period and
(ii) each Fund's non-standardized cumulative total returns over a stated period.
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: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class B and Class C shares reflect the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (3) Investor Class shares does not reflect a deduction of any sales charge 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 Class A, Class B, Class C and Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30 are found in Appendix M.
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 made
DR 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.
|
Standardized average annual total return (after taxes on distributions and redemption) for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class B and Class C shares reflect the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (3) Investor Class shares does not reflect a deduction of any sales charge 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 Class A, Class B, Class C and Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30 are found in Appendix M.
Performance Information
All advertisements of 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 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-- Value Index Lipper Large Cap Growth Fund Index Russell 2500--Trademark-- Index Lipper Large Cap Value Fund Index Russell 2500--Trademark-- Growth Index Lipper Mid Cap Core Fund Index Russell 3000--Registered Trademark-- Growth Index Lipper MidCap Growth Fund Index Russell 3000--Registered Trademark-- Index Lipper Multi Cap Growth Fund Index Russell MidCap--Registered Trademark-- Growth Index Lipper Multi Cap Value Fund Index Russell MidCap--Registered Trademark-- Index Russell 1000--Registered Trademark-- Growth Index Standard & Poor's 500 Stock Index Russell 1000--Registered Trademark-- Index Standard & Poor's Mid Cap 400 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.
From time to time, AIM Dent Demographic Trends Fund's sales literature and/or advertisements may quote (i) Harry S. Dent, Jr.'s theories on why the coming decade may offer unprecedented opportunities for investors, including his opinions on the stock market outlook and where growth may be strongest; (ii) Harry S. Dent, Jr.'s opinions and theories from his books and publications, including, but not limited to, Job Shock, The Great Boom Ahead and The Roaring 2000s, including his beliefs that (a) people's spending patterns may help predict the stock market, (b) the stock market has tended to perform best when a generation has reached its peak spending years from ages 45-50, and (c) as more and more baby boomers reach their peak spending age, they could propel stock prices up for the next decade; and (iii) Harry S. Dent, Jr.'s S-curve analysis, a forecasting tool used to analyze products that show remarkable growth.
REGULATORY INQUIRIES AND PENDING LITIGATION
The mutual fund industry as a whole is currently subject to regulatory inquires and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies and issues related to Section 529 college savings plans.
As described in the prospectuses for the AIM and INVESCO Funds, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to the INVESCO Funds, and A I M Advisors, Inc. ("AIM"), the investment advisor to the AIM and INVESCO Funds, have reached agreements in principle with certain regulators to resolve civil enforcement actions and investigations related to market timing activity in the INVESCO Funds and the AIM Funds, respectively. These regulators include the Securities and Exchange Commission ("SEC"), the State of New York, acting through the office of the state Attorney General ("NYAG"), and the State of Colorado, acting through the office of the state Attorney General ("COAG"). AIM expects that its wholly owned subsidiary A I M Distributors, Inc. ("ADI"), the distributor of the retail classes of shares of the AIM and INVESCO Funds, also will be included as a party in the settlement with respect to AIM.
On September 8, 2004, Raymond R. Cunningham's law firm issued a press release announcing that Mr. Cunningham had agreed to resolve the civil actions against him by paying the SEC and the NYAG a $500,000 civil penalty, to accept a two-year ban from the securities industry and to accept a five-year ban from serving as an officer or director in the securities industry. In addition to IFG, the SEC and NYAG had filed civil proceedings against Mr. Cunningham, in his former capacity as the chief executive officer of IFG. At the time these proceedings were filed Mr. Cunningham held the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. Mr. Cunningham is no longer affiliated with AIM.
In addition, as described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM and INVESCO Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM and INVESCO Funds, IFG, AIM and/or related entities and individuals in the future. This statement of additional information will be supplemented periodically to disclose any such additional regulatory actions, civil lawsuits and regulatory inquiries.
Ongoing Regulatory Inquiries Concerning IFG
IFG, certain related entities, certain of their current and former officers and/or certain of the INVESCO Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more INVESCO Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more INVESCO Funds.
Ongoing Regulatory Inquiries Concerning AIM
AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies and issues related to Section 529 college savings plans. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the DOL, the Internal Revenue Service, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds.
Private Civil Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities and/or certain of their current and former officers) making allegations substantially similar to the allegations in the three regulatory actions concerning market timing activity in the INVESCO Funds that have been filed by the SEC, the NYAG and the COAG against these parties. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of the Employee Retirement Income Security Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated 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; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; declaration that the advisory agreement is unenforceable or void; refund of advisory fees; interest; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of September 23, 2004 is set forth in Appendix N-1.
The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. All such cases against IFG and related defendants filed to date have been conditionally or finally transferred to the District of Maryland in accordance with the Panel's directive. In addition, the proceedings initiated in state court have been removed by IFG to Federal court and transferred to the District of Maryland. The plaintiff in one such action continues to seek remand to state court.
Private Civil Actions Alleging Improper Use of Fair Value Pricing
Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and/or AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of September 23, 2004 is set forth in Appendix N-2.
Private Civil Actions Alleging Excessive Advisory and Distribution Fees
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of September 23, 2004 is set forth in Appendix N-3.
Private Civil Actions Alleging Improper Distribution Fees Charged to Closed Funds
Multiple civil lawsuits, including purported class action and
shareholder derivative suits, have been filed against various parties
(including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the
trustees of the AIM and INVESCO Funds) alleging that the defendants breached
their fiduciary duties by charging distribution fees while funds and/or specific
share classes were closed generally to new investors and/or while other share
classes of the same fund were not charged the same distribution fees. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal securities laws; and (ii)
breach of fiduciary duty. These lawsuits have been filed in both Federal and
state courts and seek such remedies as damages; injunctive relief; and
attorneys' and experts' fees. A list identifying such lawsuits that have been
served on IFG or AIM, or for which service of process has been waived, as of
September 23, 2004 is set forth in Appendix N-4.
Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements
Multiple civil lawsuits, including purported class action and
shareholder derivative suits, have been filed against various parties
(including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment
Services, Inc. ("AIS") and/or certain of the trustees of the AIM and INVESCO
Funds) alleging that the defendants improperly used the assets of the AIM and
INVESCO Funds to pay brokers to aggressively promote the sale of the AIM and
INVESCO Funds over other mutual funds and that the defendants concealed such
payments from investors by disguising them as brokerage commissions. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal securities laws; (ii) breach
of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty.
These lawsuits have been filed in Federal courts and seek such remedies as
compensatory and punitive damages; rescission of certain Funds' advisory
agreements and distribution plans and recovery of all fees paid; an accounting
of all fund-related fees, commissions and soft dollar payments; restitution of
all unlawfully or discriminatorily obtained fees and charges; and attorneys' and
experts' fees. A list identifying such lawsuits that have been served on IFG or
AIM, or for which service of process has been waived, as of September 23, 2004
is set forth in Appendix N-5.
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 May 31, 2004
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 112 portfolios in the AIM Funds 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) -- 1951 2003 Director, President and Chief Executive Officer, None
Trustee and Executive Vice A I M Management Group Inc. (financial services
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 INVESCO Distributors, Inc.
(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,
-----------------------------------------------------------------------------------------------------------------------
|
(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
-----------------------------------------------------------------------------------------------------------------------
Inc.; President and Chief Executive Officer,
INVESCO Distributors, Inc.; Chief Executive
Officer, AMVESCAP PLC - Managed Products;
Chairman and Chief Executive Officer 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 Retired Badgley Funds, Inc.
Trustee (registered investment
Formerly: Partner, law firm of Baker & McKenzie 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 Group North America, (Holdings), Ltd.
Inc.; Senior Vice President, AB Volvo; and (insurance company)
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.
-----------------------------------------------------------------------------------------------------------------------
|
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
-----------------------------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------------------------
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 -- 1942 2003 Retired None
Trustee
-----------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
-----------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, Secretary and N/A
Senior Vice President, Chief General Counsel, A I M Management Group Inc.
Legal Officer and Secretary (financial services holding company) and A I M
Advisors, Inc.; Director and Vice President,
INVESCO Distributors, Inc.; 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
-----------------------------------------------------------------------------------------------------------------------
|
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
-----------------------------------------------------------------------------------------------------------------------
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.
-----------------------------------------------------------------------------------------------------------------------
1992 Vice President and Chief Compliance Officer, N/A
Melville B. Cox -- 1943 A I M Advisors, Inc. and A I M Capital
Vice President Management, Inc.; and Vice President,
AIM Investment Services, Inc.
-----------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President and Advisors, Inc.
Treasurer
Formerly: Senior Vice President, AIM Investment
Services, Inc.; Vice President, A I M
Distributors, Inc.
-----------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing Director N/A
Vice President and Chief Cash Management Officer, A I M Capital
Management, Inc.; Director and President, Fund
Management Company; and Vice President, A I M
Advisors, 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
Blue Chip Over $100,000
Capital Development Over $100,000
Charter Over $100,000
Constellation Over $100,000
Emerging Growth $50,001 - $100,000
Diversified Dividend Over $100,000
Large Cap Basic Value Over $100,000
Large Cap Growth Over $100,000
Mid Cap Growth Over $100,000
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 $50,001 - $100,000 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
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 $1 - $10,000 Over $100,000
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
------------------------------------------------------------------------------------------------------------------
|
(3) Includes the total amount of compensation deferred by the trustee at his or her election pursuant to a deferred compensation plan. Such deferred compensation is placed in a deferral account and deemed to be invested in one or more of the AIM and/or INVESCO Funds.
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 ESTIMATED
AGGREGATE BENEFITS ANNUAL BENEFITS TOTAL
COMPENSATION ACCRUED UPON RETIREMENT COMPENSATION
FROM THE BY ALL FROM ALL AIM FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) 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 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 VOTING POLICIES
PROXY POLICIES AND PROCEDURES
(AS AMENDED SEPTEMBER 14, 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 (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:
o 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;
o Attend less than 75 percent of the board and committee meetings without a valid excuse;
o Implement or renew a dead-hand or modified dead-hand poison pill;
o Sit on the boards of an excessive number of companies;
o Enacted egregious corporate governance or other policies or failed to replace management as appropriate;
o Have failed to act on takeover offers where the majority of the shareholders have tendered their shares; or
o 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:
o Long-term financial performance of the target company relative to its industry; Management's track record;
o Portfolio manager's assessment;
o Qualifications of director nominees (both slates);
o Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and
o 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:
o It is not clear that the auditors will be able to fulfill their function;
o 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
o 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.
o We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.
o 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.
o 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.
o We will vote for proposals to reprice options if there is a value-for-value (rather than a share-for-share) exchange.
o 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.
o 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.
o 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.
o 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.
o 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.
o We will generally abstain from shareholder social and environmental proposals.
o We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices.
o 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.
o We will generally vote for proposals to lower barriers to shareholder action.
o 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
o We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.
o We will vote against any proposals to authorize the proxy to conduct any other business that is not described in the proxy statement.
o 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. Committee members may also speak to management of a company regarding proxy issues and should share relevant considerations with the proxy committee. 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 e-mail.
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. The proxy committee shall prepare a report for the Funds' Board of Trustees on a periodic basis regarding issues where AIM's votes do not follow the recommendation of ISS or another provider because AIM's proxy policies differ from those of such 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 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 to 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.
In the event that AIM's proxy policies and voting record do not guide the proxy committee's vote in a situation where a conflict of interest exists, the proxy committee will vote the proxy in the best interest of the advisory clients, and will provide information regarding the issue to the Funds' Board of Trustees in the next quarterly report.
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.
F. FUND OF FUNDS
WHEN AN AIM FUND THAT INVESTS IN ANOTHER AIM FUND(s) HAS THE RIGHT TO VOTE ON THE PROXY OF THE UNDERLYING AIM FUND, AIM WILL SEEK GUIDANCE FROM THE BOARD OF TRUSTEES OF THE INVESTING AIM FUND ON HOW TO VOTE SUCH PROXY.
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 September 15, 2004.
AIM AGGRESSIVE GROWTH 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
------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta 7th Fl
333 West 34th St
New York, NY 10001-2402 5.27% -- -- -- --
------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484 6.81% -- 10.59% -- --
------------------------------------------------------------------------------------------------------------------
The Manufacturers Life
Insurance Company (U.S.A.)
250 Bloor St East, 7th Floor
Toronto, Ontario, Canada
M4WIE5 11.64% -- -- -- --
------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department
PO Box 901075
Fort Worth, TX 76101-2075 -- -- -- -- 97.66%
------------------------------------------------------------------------------------------------------------------
Girard Machine Company
Inc. 401(K)
FBO Donald Malito Trustee
700 Dot Street
Girard, Ohio 44420-1701 -- -- -- 5.36% --
------------------------------------------------------------------------------------------------------------------
|
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
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Olson International Ltd
401(K) plan
PO Box 48529
Atlanta, GA 30362-1529 -- -- -- 7.39% --
------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Company Trustee
FBO Otis Koglin Wilson
Architects Inc. 401(K) Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 9.53% --
------------------------------------------------------------------------------------------------------------------
Reliance Trust
FBO Northern Printing Network
401(K)
PO Box 48529
Atlanta, GA 30362-1529 -- -- -- 5.73% --
------------------------------------------------------------------------------------------------------------------
|
AIM BLUE CHIP FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
----------------------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Co. Trustee
FBO The McDevitt Co.
Employees 401(K) Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 35.00% -- --
----------------------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Co. Trustee
FBO Itasca Bank & Trust
Co. 401(K) Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 5.22% -- --
----------------------------------------------------------------------------------------------------------------------------------
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246-6484 7.99% 6.91% 13.15% -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp
FBO The One Investment
Solution
Attn: Wrap Processing
OH1-1244
1111 Polaris Pkwy, Ste J-2
Columbus, OH 43240-2050 -- -- 5.01% -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Capital Bank & Trust Co.
FBO Government Micro
Resources Inc. 401(K)
C/O Planpremier/FASCORP
8515 E Orchard Rd #2T2
Greenwood Village, CO
80111-5002 -- -- -- 8.11% -- --
----------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta
7th Floor
333 West 34th Street
New York, NY 10001-2402 -- 6.30% 6.72% -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc.
Special Custody FBO
Customers (SIM)
Attn: Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122 -- -- -- -- -- 9.09%
----------------------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department
PO Box 901075
Fort Worth, TX 76101-2075 -- -- -- -- 6.19% --
----------------------------------------------------------------------------------------------------------------------------------
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
----------------------------------------------------------------------------------------------------------------------------------
ICMA Retirement Corp FBO
Investors Bank & Trust
Trustee
County Sanitation Districts
No 2
777 N Capitol St NE,
Ste 600
Washington, D.C.
20002-4290 -- -- -- -- 65.74% --
----------------------------------------------------------------------------------------------------------------------------------
Investors Bank & Trust Co.
777 N Capitol St. NE,
Ste 600
Washington, D.C. 20002-4290 -- -- -- -- 28.04% --
|
AIM CAPITAL DEVELOPMENT FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484 5.27% 8.95% 12.55% -- -- N/A
----------------------------------------------------------------------------------------------------------------------------------
Capital Bank & Trust Co.
Trustee FBO Sakson &
Taylor Inc. 401(K) PSP
C/O Planpremier/FASCORP
8515 E Orchard Rd Ste 2T2
Greenwood Village, CO
80111-5002 -- -- -- 21.47% -- N/A
----------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta
7th Floor
333 West 34th St
New York, NY 10001-2402 -- 6.61% -- -- -- N/A
----------------------------------------------------------------------------------------------------------------------------------
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
------------------------------------------------------------------------------------------------------------------ ------------
Coastgear & Company
State Street Bank & Trust
Attn: Kevin Smith
105 Rosemont Avenue
Westwood, MA 02090-2318 -- -- 9.25% -- -- N/A
----------------------------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plz, Ste 100
Houston, TX 77046 -- -- -- -- 95.50% N/A
----------------------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust Co.
FBO Equator Technologies, Inc.
401(K) Retirement Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 17.07% -- N/A
----------------------------------------------------------------------------------------------------------------------------------
MCB Trust Services
Custodian
FBO
700 17th St, Ste 300
Denver, CO 80202-3531 -- -- -- 7.09% -- N/A
----------------------------------------------------------------------------------------------------------------------------------
MCB Trust Services
Custodian
FBO Big Boy 401(K) Plan &
Trust
700 17th St, Ste 300
Denver, CO 80202-3531 -- -- -- 6.05% -- N/A
----------------------------------------------------------------------------------------------------------------------------------
|
* 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
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246 7.75% 5.73% 13.12% -- --
------------------------------------------------------------------------------------------------------------------
|
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
------------------------------------------------------------------------------------------------------------------
AIM Conservative Asset
Allocation Fund Omnibus Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113 -- -- -- -- 16.98%
------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Co. FBO Equator
Technologies, Inc.
401(K) Retirement Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 12.38% --
------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Co. Trustee
FBO Big Horn Basin
Orthopedic Clinic PC
Profit Sharing Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 13.95% --
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian FBO Morley
Incentives 401(K) Profit
Sharing Plan & Trust
PO Box 48529
Atlanta, GA 30362-1529 -- -- -- 19.91% --
------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department
PO Box 901075
Fort Worth, TX 76101-0000 -- -- -- -- 66.13%
------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta
7th Floor
333 West 34th Street
New York, NY 10001-2402 5.81% 5.70% 6.85% -- --
------------------------------------------------------------------------------------------------------------------
|
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
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246 11.10% -- 15.37% -- --
------------------------------------------------------------------------------------------------------------------
American Express Trust
American Express
996 AXP Financial Ctr
Minneapolis, MN 55474-0009 -- -- -- -- 9.40%
------------------------------------------------------------------------------------------------------------------
Ohio Public
Employees Deferred
Compensation
250 Civic Center Dr, Ste 350
Columbus, OH 43215-5450 -- -- -- -- 58.49%
------------------------------------------------------------------------------------------------------------------
Wells Fargo Bank West NA
Custodian
City of Houston
457 Deferred Compensation
Plan
C/O Great West,
Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-0000 -- -- -- -- 9.86%
------------------------------------------------------------------------------------------------------------------
Nationwide Trust Company
FBO Participating Retirement
Plans
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218 -- -- -- -- 9.57%
------------------------------------------------------------------------------------------------------------------
State of Vermont Deferred
Compensation
C/O Great West Life
8515 E Orchard Rd 2T2
Greenwood Village, CO 80111-5002 -- -- -- -- 7.18%
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO William J Kamm and
Sons Inc. 401(K) Plan
PO Box 48529
Atlanta, GA 30362-1529 -- -- -- 8.29% --
------------------------------------------------------------------------------------------------------------------
|
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
------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Co. Trustee
FBO Guys Inc. 401(K) Profit
Sharing Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 5.88% --
------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Co. Trustee
FBO Speidel Inc. 401(K) Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 9.03% --
------------------------------------------------------------------------------------------------------------------
Relistar Insurance Co.
of New York
151 Famington Ave - TN 41
Hartford, CT 06156-0001 -- -- -- 5.34% --
------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Account
Attn: Cindy Tempesta
7th Floor
333 West 34th Street
New York, NY 10001-2403 5.77% 5.28% 6.75% -- --
------------------------------------------------------------------------------------------------------------------
|
AIM CORE STRATEGIES FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plz, Ste 100
Houston, TX 77046 100%** 100%** 100%**
----------------------------------------------------------------------------------------------------------------
|
* 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
----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246 -- 9.76% 14.85%
----------------------------------------------------------------------------------------------------------------
Citigroup Global House Acct
Attn: Cindy Tempesta
7th Floor
333 West 34th Street
New York, NY 10001-2402 -- 9.55% 11.71%
----------------------------------------------------------------------------------------------------------------
|
AIM DIVERSIFIED DIVIDEND FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Solo Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246 5.35% 12.85% 5.03%
----------------------------------------------------------------------------------------------------------------
|
AIM EMERGING GROWTH FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246 8.13% 5.37% 12.58%
----------------------------------------------------------------------------------------------------------------
|
AIM LARGE CAP BASIC VALUE FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246 21.19% 14.02% 19.50% -- -- --
----------------------------------------------------------------------------------------------------------------------------------
AIM Moderate Asset Allocation
Fund Omnibus Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113 -- -- -- -- 48.34% --
----------------------------------------------------------------------------------------------------------------------------------
AIM Aggressive Asset
Allocation Fund Omnibus
Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113 -- -- -- -- 41.85%
----------------------------------------------------------------------------------------------------------------------------------
AIM Conservative Asset
Allocation Fund Omnibus
Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113 -- -- -- -- 9.74%
----------------------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust
Co. FBO Itasca Bank & Trust
Co. 401(K) Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 12.94% -- --
----------------------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian FBO Rosin
Optical Co. Inc.
Profit Sharing Plan
PO Box 48529
Atlanta, GA 30362-1529 -- -- -- 15.57% -- --
----------------------------------------------------------------------------------------------------------------------------------
Federated Lighting Inc.
401(K) Profit Sharing Plan
1600 Trade Zone Ave,
Ste 406
Upper Marlboro, MD 20772 -- -- -- 16.48% -- --
----------------------------------------------------------------------------------------------------------------------------------
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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 Co. Trustee
Magellan Health Services
Retirement Savings Plan &
Trust 401(K)
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- -- -- 21.64%
----------------------------------------------------------------------------------------------------------------------------------
INVESCO Trust Co.
FBO Hanger Orthopedic
Group Inc. & Sel. Sub Tax
Deferred Savings Plan &
Trust 401(K)
400 Colony Sq, Ste 2200
1201 Peachtree, Ste NE
Atlanta, GA 30361-6302 -- -- -- -- -- 5.47%
----------------------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc.
Special Custody FBO
Customers (SIM)
Attn: Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122 -- -- -- -- -- 7.85%
----------------------------------------------------------------------------------------------------------------------------------
INVESCO Trust Co. Trustee
Hickory Springs MFG Co.
Savings & Trust
PO Box 218
Hickory, NC 28603-0128 -- -- -- -- -- 5.67%
----------------------------------------------------------------------------------------------------------------------------------
|
AIM LARGE CAP GROWTH FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246 29.49% 10.26% 9.74% -- -- --
----------------------------------------------------------------------------------------------------------------------------------
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL INVESTOR
SHARES SHARES SHARES SHARES CLASS SHARES CLASS 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
----------------------------------------------------------------------------------------------------------------------------------
AIM Moderate Asset
Allocation Fund Omnibus
Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113 -- -- -- -- 51.17% --
----------------------------------------------------------------------------------------------------------------------------------
AIM Aggressive Asset
Allocation Fund Omnibus
Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113 -- -- -- -- 40.51% --
----------------------------------------------------------------------------------------------------------------------------------
AIM Conservative Asset
Allocation Fund Omnibus
Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113 -- -- -- -- 8.25% --
----------------------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust Co.
Trustee
FBO Big Horn Basin
Orthopedic Clinic
Profit PC Sharing Plan
PO Box 105779
Atlanta, GA 30348 -- -- -- 25.69% -- --
----------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta
7th Floor
333 West 34th Street
New York, NY 10001-2483 -- 5.70% 18.14% -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian FBO Continental
Products Inc. 401(K) Plan
PO Box 48529
Atlanta, GA 30362-1529 -- -- -- 11.15% -- --
----------------------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian FBO Morley
Incentives 401(K) Profit
Sharing Plan & Trust
PO Box 48529
Atlanta, GA 30362-1529 -- -- -- 23.92% -- --
----------------------------------------------------------------------------------------------------------------------------------
|
AIM MID CAP GROWTH 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
------------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plz ,Ste 100
Houston, TX 77046-1103 -- -- -- -- 100%
------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246 10.52% 8.26% 16.64% -- --
------------------------------------------------------------------------------------------------------------------
MCB Trust Services Custodian
FBO
700 17th St, Ste 300
Denver, CO 80202-3531 -- -- -- 24.59% --
------------------------------------------------------------------------------------------------------------------
AMVESCAP National Trust Co.
FBO West Boylston Insurance
Agency Inc.
401(K) Plan
PO Box 105779
Atlanta, GA 30348-5779 -- -- -- 13.78% --
------------------------------------------------------------------------------------------------------------------
MCB Trust Services Custodian
FBO Pacific Business Group
On Heal
700 17th St, Ste 300
Denver, CO 80202-3531 -- -- -- 6.69% --
------------------------------------------------------------------------------------------------------------------
|
* Owned of record and beneficially.
AIM SELECT BASIC VALUE FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plz, Ste 100
Houston, TX 77046-1103 100%** 100%** 100%**
----------------------------------------------------------------------------------------------------------------
|
* Owned of record and beneficially.
** Presumed to be a control person because of beneficial ownership of 25% or more of the Fund.
AIM U.S. GROWTH FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
----------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.*
Attn: David Hessel
11 Greenway Plz, Ste 100
Houston, TX 77046 100%** 100%** 100%**
----------------------------------------------------------------------------------------------------------------
|
* 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
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246 10.74% 5.30% 16.24% 32.14% --
------------------------------------------------------------------------------------------------------------------
Macquarium Inc. 401(K)
Louis K or Mark F Adler
Trustees Omnibus Acct
910 Travis St, Ste 1950
Houston, TX 77002-5806 -- -- -- 6.56% --
------------------------------------------------------------------------------------------------------------------
City of Cambridge, Trustee FBO
City of Cambridge 457 Deferred
Compensation Plan
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-5002 -- -- -- -- 6.99%
------------------------------------------------------------------------------------------------------------------
William Wilson Assoc
Architects 401(K)
James Leslie TTEE
Omnibus Acct
374 Congress St, Ste 400
Boston, MA 02210-1807 -- -- -- 5.81% --
------------------------------------------------------------------------------------------------------------------
|
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 House Acct
Attn: Cindy Tempesta
7th Floor
333 West 34th Street
New York, NY 10001-2483 7.54% 6.05% 5.29% -- --
------------------------------------------------------------------------------------------------------------------
AIM Foundation
Attn: Patricia Lewis
11 Greenway Plz, Ste 2600
Houston, TX 77046 -- -- -- -- 27.02%
------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department
PO Box 901075
Fort Worth, TX 76101-0000 -- -- -- -- 7.48%
------------------------------------------------------------------------------------------------------------------
David Leary, Trustee
FBO Town of Weymouth
457 Deferred Compensation Plan
C/O Great West,
Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-0000 -- -- -- -- 10.22%
------------------------------------------------------------------------------------------------------------------
Town of Watertown, Trustee
FBO Town of Watertown
457 Deferred Compensation Plan
C/O Great West,
Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-0000 -- -- -- -- 9.61%
------------------------------------------------------------------------------------------------------------------
City of Springfield, Trustee
FBO City of Springfield 457
Deferred Compensation Plan
C/O Great West,
Recordkeeper
8515 E Orchard Rd. 2T2
Engelwood, CO 80111-5037 -- -- -- -- 7.43%
------------------------------------------------------------------------------------------------------------------
MCB Trust Services Custodian
FBO Harmony Printing &
Development
700 17th St, Ste 300
Denver, CO 80202-3531 -- -- -- 15.55% --
------------------------------------------------------------------------------------------------------------------
Reginald B Berka or William
Nichtberger Trustees FBO
Aphelion Inc. Employees
Savings Trust
1100 Nasa Rd 1, Ste 606
Houston, TX 77058-3325 -- -- -- 5.39% --
------------------------------------------------------------------------------------------------------------------
|
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
------------------------------------------------------------------------------------------------------------------
Cortina Tool & Molding Co.
Michael Giannelli
912 Tamer Ln
Glenview, IL 60025-3767 -- -- -- 5.32% --
------------------------------------------------------------------------------------------------------------------
|
MANAGEMENT OWNERSHIP
As of September 15, 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:
2003 2002
----------------------------------------- -----------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT MANAGEMENT NET MANAGEMENT
FUND NAME FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE 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 Core
Strategies
Fund(1) 6,219 6,219 -0- 5,619 5,619 -0-
AIM Dent
Demographic
Trends Fund 4,249,017 3,998 4,245,019 6,351,166 5,666 6,345,500
AIM
Diversified
Dividend
Fund(1) 215,768 175,090 40,678 44,236 44,236 -0-
AIM Emerging
Growth Fund $ 1,059,148 $ 2,037 $ 1,057,111 $ 1,352,147 $ 1,704 $ 1,350,443
2001
----------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT
FUND NAME FEE PAYABLE FEE WAIVERS FEE PAID
--------- ----------- ----------- --------------
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 Core
Strategies
Fund(1) N/A N/A N/A
AIM Dent
Demographic
Trends Fund 10,214,781 1,945 10,212,836
AIM
Diversified
Dividend
Fund(1) N/A N/A N/A
AIM Emerging
Growth Fund $ 1,912,682 261,774 $ 1,650,908
|
2003 2002
----------------------------------------- -----------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT MANAGEMENT NET MANAGEMENT
FUND NAME FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID
--------- ----------- ----------- -------------- ----------- ----------- --------------
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 Select
Basic Value
Fund(2) 7,610 7,610 $-0- 1,164 1,164 $-0-
AIM U.S.
Growth Fund(2) 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
2001
----------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT
FUND NAME FEE PAYABLE FEE WAIVERS FEE PAID
--------- ----------- ----------- --------------
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 Select
Basic Value
Fund(2) N/A N/A N/A
AIM U.S.
Growth Fund(2) N/A N/A N/A
AIM Weingarten
Fund 46,064,764 584,500 45,480,264
|
(1) Commenced operations on December 31, 2001
(2) Commenced operations on August 30, 2002
For the last three fiscal periods or years ended October 31, the sub-advisory fees paid by AIM Advisors to H.S. Dent Advisors, Inc. with respect to services provided to the AIM Dent Demographic Trends Funds were as follows:
2003 2002 2001
---- ---- ----
AIM Dent Demographic Trends Fund ..... $649,850 971,355 $2,403,478
|
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 Core Strategies Fund(1) 50,000 41,781 N/A
AIM Dent Demographic Trends Fund 132,438 145,864 151,955
AIM Diversified Dividend Fund(1) 50,000 41,781 N/A
AIM Emerging Growth Fund 50,000 50,000 50,000
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 Select Basic Value Fund(2) 50,000 8,493 N/A
AIM U.S. Growth Fund(2) 50,000 8,493 N/A
AIM Weingarten Fund 519,857 450,564 392,623
|
(1) Commenced operations on December 31, 2001
(2) Commenced operations on August 30, 2002
APPENDIX H
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years or period 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 Core Strategies Fund(4) 1,555 1,587 N/A
AIM Dent Demographic Trends Fund(5) 3,147,902 4,652,389 3,053,966
AIM Diversified Dividend Fund(4) 66,926 17,394 N/A
AIM Emerging Growth Fund(6),(7) 2,313,707 2,158,091 1,016,711
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 Select Basic Value Fund(8) 570 1,313 N/A
AIM U.S. Growth Fund(8) 738 844 N/A
AIM Weingarten Fund(9) 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 brokerage commissions paid by the 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) Commenced operations on December 31, 2001.
(5) The variation in brokerage commissions paid by AIM Dent Demographic Trends Fund for the fiscal year ended October 31, 2002, as compared to the two prior fiscal years, was due to a significant fluctuation in asset levels, cash outflows and an increase in transactions on which commissions were paid.
(6) Commenced operations on March 31, 2000.
(7) The variation in brokerage commissions paid by AIM Emerging Growth Fund for the fiscal year ended October 31, 2002, as compared to the two prior fiscal years, was due to a significant fluctuation in asset levels, increased portfolio turnover and an increase in transactions on which commissions were paid.
(8) Commenced operations on August 30, 2002.
(9) 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 Core Strategies Fund 8,014 9
AIM Dent Demographic Trends Fund 219,593,219 364,683
AIM Diversified Dividend Fund 1,134,623 2,779
AIM Emerging Growth Fund 88,027,965 223,527
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 Select Basic Value Fund 44,106 84
AIM U.S. Growth Fund 3,013 4
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
|
Fund/Issuer Security Market Value (as of October 31, 2003)
----------- -------- -------------------------------------
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 Core Strategies Fund
Bear Stearns Cos., Inc. (The) Common Stock 3,050
J.P. Morgan Chase & Co. Common Stock 7,180
Lehman Brothers Holdings Inc. Common Stock 2,880
Merrill Lynch & Co., Inc. Common stock 10,064
Morgan Stanley Common Stock 8,231
AIM Dent Demographic Trends Fund
Charles Schwab Corp. (The) Common Stock 5,220,600
Goldman Sachs Group, Inc. (The) Common Stock 8,920,500
J. P. Morgan Chase & Co. Common Stock 7,898,000
Merrill Lynch & Co., Inc. Common stock 7,400,000
AIM Diversified Dividend Fund
Lehman Brothers Holdings Inc. Common Stock 417,600
Merrill Lynch & Co., Inc. Common stock 278,240
Morgan Stanley Common Stock 576,135
AIM Emerging Growth Fund
Bear Stearns Cos., Inc. (The) Common Stock 762,500
Lehman Brothers Holdings Inc. Common Stock 1,440,000
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 Select Basic Value Fund
J.P. Morgan Chase & Co. Common Stock 35,900
Merrill Lynch & Co., Inc. Common Stock 59,200
AIM Weingarten Fund
Charles Schwab Corp. (The) Common Stock 22,374,000
Goldman Sachs Group, Inc. (The) Common Stock 46,950,000
|
Fund/Issuer Security Market Value (as of October 31, 2003)
----------- -------- -------------------------------------
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
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS
A list of amounts paid by each class of shares to AIM Distributors pursuant to the Plans for the fiscal year or period ended October 31, 2003 follows:
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS
FUND SHARES SHARES SHARES SHARES SHARES
---- ----------- ------------ ----------- ---------- ---------
AIM Aggressive Growth Fund $ 4,512,997 $ 2,320,962 $ 720,696 $ 2,722 N/A
AIM Blue Chip Fund 4,741,551 11,597,496 2,827,049 2,613 $ 10
AIM Capital Development Fund 1,681,630 3,525,000 588,010 3,016 N/A
AIM Charter Fund 5,969,787 11,503,103 1,621,567 3,783 N/A
AIM Constellation Fund 19,315,644 6,227,801 1,792,081 6,237 N/A
AIM Core Strategies Fund 1,160 2,488 2,488 N/A N/A
AIM Dent Demographic Trends Fund 660,338 2,241,790 870,372 N/A N/A
AIM Diversified Dividend Fund 45,341 128,716 29,430 N/A N/A
AIM Emerging Growth Fund 227,193 416,099 180,834 N/A N/A
AIM Large Cap Basic Value Fund 378,423 696,925 239,648 934 16
AIM Large Cap Growth Fund 416,198 1,075,412 376,000 4,613 5
AIM Mid Cap Growth Fund 283,951 660,267 206,942 252 N/A
AIM Select Basic Value Fund 1,420 3,044 3,044 N/A N/A
AIM U.S. Growth Fund 1,403 3,008 3,008 N/A N/A
AIM Weingarten Fund 6,092,977 5,246,170 852,575 920 N/A
|
APPENDIX K
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS
An estimate by category of the allocation of actual fees paid by Class A shares of the Funds during the fiscal year ended October 31, 2003, follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ---------- -------- ------------ ------------
AIM Aggressive Growth Fund $ -0- $ -0- $ -0- $ -0- $ 4,512,997
AIM Blue Chip Fund 314,792 45,277 145,560 -0- 4,235,922
AIM Capital Development Fund 109,178 15,875 48,705 -0- 1,507,872
AIM Charter Fund 316,774 45,668 148,485 -0- 5,458,860
AIM Constellation Fund 910,305 131,198 422,447 -0- 17,851,694
AIM Core Strategies Fund N/A N/A N/A N/A N/A
AIM Dent Demographic Trends Fund 59,835 8,583 24,879 -0- 567,041
AIM Diversified Dividend Fund -0- -0- 762 -0- 44,578
AIM Emerging Growth Fund 18,855 2,782 6,182 -0- 199,374
AIM Large Cap Basic Value Fund 29,305 4,250 16,156 -0- 328,712
AIM Large Cap Growth Fund 30,393 4,517 10,910 -0- 370,378
AIM Mid Cap Growth Fund 19,770 2,696 9,985 -0- 251,500
AIM Select Basic Value Fund N/A N/A N/A N/A N/A
AIM U.S. Growth Fund N/A N/A N/A N/A N/A
AIM Weingarten Fund 341,489 49,284 156,823 -0- 5,545,381
|
An estimate by category of the allocation of actual fees paid by Class B shares of the Funds during the fiscal year ended October 31, 2003, follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ---------- -------- ------------ ------------
AIM Aggressive Growth Fund $ 27,497 $ 3,902 $ 11,961 $ 1,740,721 $ 536,881
AIM Blue Chip Fund 66,855 9,647 31,552 8,698,122 2,791,320
AIM Capital Development Fund 18,624 2,711 9,203 2,643,750 850,712
AIM Charter Fund 41,510 5,972 18,878 8,627,327 2,809,416
AIM Constellation Fund 50,729 7,302 23,663 4,670,851 1,475,256
AIM Core Strategies Fund N/A N/A N/A N/A N/A
AIM Dent Demographic Trends Fund 11,725 1,682 5,688 1,681,343 541,352
AIM Diversified Dividend Fund -0- -0- -0- 96,537 32,179
AIM Emerging Growth Fund 1,939 303 1,682 312,074 100,101
AIM Large Cap Basic Value Fund 8,099 1,195 3,319 522,694 161,618
AIM Large Cap Growth Fund 10,627 1,493 5,103 806,559 251,630
AIM Mid Cap Growth Fund 7,413 1,191 1,985 495,200 154,478
AIM Select Basic Value Fund N/A N/A N/A N/A N/A
AIM U.S. Growth Fund N/A N/A N/A N/A N/A
AIM Weingarten Fund 34,394 4,919 16,301 3,934,628 1,255,928
|
An estimate by category of the allocation of actual fees paid by Class C shares of the Funds during the fiscal year ended October 31, 2003, follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ---------- -------- ------------ ------------
AIM Aggressive Growth Fund $ 11,639 $ 1,587 $ 5,144 $ 90,381 $ 611,945
AIM Blue Chip Fund 20,995 3,056 9,903 172,596 2,620,499
AIM Capital Development Fund 8,968 1,223 3,397 65,222 509,200
AIM Charter Fund 10,800 1,593 5,312 87,641 1,516,221
AIM Constellation Fund 21,252 2,898 0 156,977 1,610,953
AIM Core Strategies Fund N/A N/A N/A N/A N/A
AIM Dent Demographic Trends Fund 6,034 765 2,125 43,351 818,097
AIM Diversified Dividend Fund 2,737 601 0 10,016 16,076
AIM Emerging Growth Fund 957 0 0 14,354 165,523
AIM Large Cap Basic Value Fund 2,222 220 3,664 36,640 196,902
AIM Large Cap Growth Fund 6,354 1,211 2,522 52,961 312,952
AIM Mid Cap Growth Fund 0 0 1,552 32,590 172,800
AIM Select Basic Value Fund N/A N/A N/A N/A N/A
AIM U.S. Growth Fund N/A N/A N/A N/A N/A
AIM Weingarten Fund 10,307 1,405 4,555 80,032 756,276
|
An estimate by category of the allocation of actual fees paid by Class R shares of the Funds during the fiscal year ended October 31, 2003, follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ---------- -------- ------------ ------------
AIM Aggressive Growth Fund $ 94 $ 13 $ 38 $ 0 $ 2,577
AIM Blue Chip Fund 54 8 27 0 2,524
AIM Capital Development Fund 56 9 49 0 2,902
AIM Charter Fund 68 10 35 0 3,670
AIM Constellation Fund 134 21 103 0 5,979
AIM Core Strategies Fund N/A N/A N/A N/A N/A
AIM Dent Demographic Trends Fund 0 0 0 0 0
AIM Diversified Dividend Fund 0 0 0 0 0
AIM Emerging Growth Fund 0 0 0 0 0
AIM Large Cap Basic Value Fund 16 2 4 0 912
AIM Large Cap Growth Fund 100 15 49 0 4,448
AIM Mid Cap Growth Fund 26 4 7 0 215
AIM Select Basic Value Fund N/A N/A N/A N/A N/A
AIM U.S. Growth Fund N/A N/A N/A N/A N/A
AIM Weingarten Fund 43 7 25 0 845
|
INVESTOR CLASS
Total fees paid by the Investor Class shares of AIM Blue Chip Fund, AIM Large Cap Growth Fund and AIM Large Cap Basic Value Fund during the fiscal year ended October 31, 2003 were $31.86.
APPENDIX L
TOTAL SALES CHARGES
The following chart reflects the total sales charges paid in connection with the sale of Class A shares of each Fund and the amount retained by AIM Distributors for the last three fiscal periods or years ending October 31:
2003 2002 2001
----------------------- ----------------------- -------------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
----------- ---------- ----------- ---------- ---------- -------------
AIM Aggressive Growth Fund $ 1,477,466 $ 247,028 $ 2,490,945 $ 401,540 $ 6,941,065 $ 1,042,378
AIM Blue Chip Fund 2,166,217 345,660 3,369,955 524,961 10,186,805 1,504,443
AIM Capital Development Fund 650,576 104,786 1,081,325 167,124 1,471,704 217,702
AIM Charter Fund 1,630,264 266,509 2,445,644 387,132 8,482,508 1,267,570
AIM Constellation Fund 5,079,332 829,628 7,869,917 1,272,976 18,221,618 2,721,593
AIM Core Strategies Fund(1) N/A N/A N/A N/A N/A N/A
AIM Dent Demographic Trends Fund 500,311 76,461 890,896 131,333 3,448,426 505,337
AIM Diversified Dividend Fund(1) 229,293 36,213 70,911 11,277 N/A N/A
AIM Emerging Growth Fund 200,893 30,155 255,036 42,050 711,947 108,381
AIM Large Cap Basic Value Fund 350,376 57,471 447,812 72,325 838,531 120,808
AIM Large Cap Growth Fund 388,322 64,104 567,190 89,304 2,588,386 403,111
AIM Mid Cap Growth Fund 324,066 51,252 456,202 70,433 1,057,009 162,126
AIM Select Basic Value Fund(2) N/A N/A N/A N/A N/A N/A
AIM U.S. Growth Fund(2) N/A N/A N/A N/A N/A N/A
AIM Weingarten Fund 1,731,309 286,925 2,965,221 482,681 9,137,102 1,394,055
|
(1) Commenced operations on December 31, 2001
(2) Commenced operations on August 30, 2002
The following chart reflects the contingent deferred sales charges paid by Class A, Class B, Class C and Class R shareholders and retained by AIM Distributors for the last three fiscal periods or years ended October 31:
2003 2002 2001
-------- -------- --------
AIM Aggressive Growth Fund $ 63,023 $ 88,844 $127,954
AIM Blue Chip Fund 47,754 107,445 251,600
AIM Capital Development Fund 8,033 15,360 19,079
AIM Charter Fund 15,403 69,358 191,689
AIM Constellation Fund 17,015 183,857 317,491
AIM Core Strategies Fund(1) N/A N/A N/A
AIM Dent Demographic Trends Fund 4,229 27,687 152,995
AIM Diversified Dividend Fund(1) 593 83 N/A
AIM Emerging Growth Fund 18,295 8,141 50,717
AIM Large Cap Basic Value Fund 5,191 10,512 31,559
AIM Large Cap Growth Fund 4,838 19,917 97,612
AIM Mid Cap Growth Fund 3,045 16,428 26,251
AIM Select Basic Value Fund(2) N/A N/A N/A
AIM U.S. Growth Fund(2) N/A N/A N/A
AIM Weingarten Fund 11,387 61,852 163,986
|
(1) Commenced operations on December 31, 2001
(2) Commenced operations on August 30, 2002
APPENDIX M
PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURNS
The average annual total returns (including sales load) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 19.59% 1.44% 8.50% -- 05/01/84
AIM Blue Chip Fund 9.59% -6.74% 8.45% -- 02/04/87
AIM Capital Development Fund 25.85% 6.99% N/A 9.03% 06/17/96
AIM Charter Fund 16.78% -4.44% 8.27% -- 11/26/68
AIM Constellation Fund 14.06% -2.74% 6.74% -- 04/30/76
AIM Core Strategies Fund 13.83% N/A N/A -3.46% 12/31/01
AIM Dent Demographic Trends Fund 17.44% N/A N/A -5.84% 06/07/99
AIM Diversified Dividend Fund 21.18% N/A N/A 3.22% 12/31/01
AIM Emerging Growth Fund 30.00% N/A N/A -10.62% 03/31/00
AIM Large Cap Basic Value Fund 24.46% N/A N/A 4.49% 06/30/99
AIM Large Cap Growth Fund 15.13% -3.75% N/A -2.69% 03/01/99
AIM Mid Cap Growth Fund 24.59% N/A N/A -3.01% 11/01/99
AIM Select Basic Value Fund 29.40% N/A N/A 13.65% 08/30/02
AIM U.S. Growth Fund 12.37% N/A N/A 6.07% 08/30/02
AIM Weingarten Fund 15.20% -11.14% 4.71% -- 06/17/69
|
The average annual total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 20.45% 1.48% N/A 2.91% 03/01/99
AIM Blue Chip Fund 10.33% -6.68% N/A 4.21% 10/01/96
AIM Capital Development Fund 27.26% 7.18% N/A 7.75% 10/01/96
AIM Charter Fund 17.66% -4.40% N/A 7.15% 06/26/95
AIM Constellation Fund 14.82% -2.64% N/A 0.13% 11/03/97
AIM Core Strategies Fund 15.42% N/A N/A -2.36% 12/31/01
AIM Dent Demographic Trends Fund 18.46% N/A N/A -5.76% 06/07/99
AIM Diversified Dividend Fund 22.34% N/A N/A 3.84% 12/31/01
AIM Emerging Growth Fund 31.78% N/A N/A -10.35% 03/31/00
AIM Large Cap Basic Value Fund 25.92% N/A N/A 2.84% 08/01/00
AIM Large Cap Growth Fund 16.12% -3.70% N/A -4.47% 04/05/99
AIM Mid Cap Growth Fund 26.13% N/A N/A -2.92% 11/01/99
AIM Select Basic Value Fund 31.93% N/A N/A 15.40% 08/30/02
AIM U.S. Growth Fund 13.95% N/A N/A 7.45% 08/30/02
AIM Weingarten Fund 15.97% -11.06% N/A 2.84% 06/26/95
|
The average annual total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 24.63% 1.78% N/A 3.06% 03/01/99
AIM Blue Chip Fund 14.33% -6.29% N/A 0.17% 08/04/97
AIM Capital Development Fund 31.29% 7.49% N/A 5.88% 08/04/97
AIM Charter Fund 21.82% -4.05% N/A 1.50% 08/04/97
AIM Constellation Fund 18.83% -2.35% N/A -0.02% 08/04/97
AIM Core Strategies Fund 19.42% N/A N/A -1.10% 12/31/01
AIM Dent Demographic Trends Fund 22.46% N/A N/A -5.37% 06/07/99
AIM Diversified Dividend Fund 26.37% N/A N/A 5.02% 12/31/01
AIM Emerging Growth Fund 36.09% N/A N/A -9.93% 03/31/00
AIM Large Cap Basic Value Fund 29.82% N/A N/A 3.55% 08/01/00
AIM Large Cap Growth Fund 20.26% -3.29% N/A -4.26% 04/05/99
AIM Mid Cap Growth Fund 29.94% N/A N/A -2.49% 11/01/99
AIM Select Basic Value Fund 35.93% N/A N/A 17.56% 08/30/02
AIM U.S. Growth Fund 17.95% N/A N/A 9.72% 08/30/02
AIM Weingarten Fund 19.95% -10.79% N/A -3.34% 08/04/97
|
The average annual total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004*
---------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 26.05% 2.31% 8.82% -- 05/01/84
AIM Blue Chip Fund 15.87% -5.80% 8.92% -- 02/04/87
AIM Capital Development Fund 32.97% 8.03% N/A 9.64% 06/17/96
AIM Charter Fund 23.27% -3.58% 8.64% -- 11/26/68
AIM Constellation Fund 20.34% -1.76% 7.17% -- 04/30/76
AIM Large Cap Basic Value Fund 31.45% N/A N/A 5.55% 06/30/99
AIM Large Cap Growth Fund 21.63% -2.78% N/A -1.75% 03/01/99
AIM Mid Cap Growth Fund 31.71% N/A N/A -1.97% 11/01/99
AIM Weingarten Fund 21.54% -10.32% 5.09% -- 06/17/69
|
* The returns shown for the one year period are the historical returns of the Funds' Class R shares. The returns shown for the five and ten year periods and since inception are the blended returns of the historical performance of the Funds' Class R shares since June 3, 2002 and the restated historical performance of the Funds' Class A shares (for periods prior to June 3, 2002) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares.
** The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the Funds' Class R shares is June 3, 2002.
The average annual total returns for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE***
---------------------- ------ ------- -------- --------- ---------
AIM Blue Chip Fund* 16.17% -5.64% 9.09% -- 02/04/87
AIM Capital Development Fund** 33.21% 8.21% N/A 9.81% 06/17/96
AIM Large Cap Basic Value Fund* 31.84% N/A N/A 5.73% 06/30/99
AIM Large Cap Growth Fund* 22.30% -2.58% N/A -1.55% 03/01/99
|
* The returns shown for these periods are the blended returns of AIM Blue Chip Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Investor Class shares since September 30, 2003 and the restated historical performance of each Funds' Class A shares (for periods prior to September 30, 2003) at net asset value, and reflect the higher Rule 12b-1 fees applicable to the Class A shares.
** The returns shown for these periods are the restated historical performance of AIM Capital Development Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
*** The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the Funds' Investor Class shares (except AIM Capital Development Fund) is September 30, 2003. As of the date of this Statement of Additional Information, the Investor Class Shares of AIM Capital Development Fund had not yet commenced operations.
CUMULATIVE TOTAL RETURNS
The cumulative total returns (including sales load) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 19.59% 7.41% 126.07% -- 05/01/84
AIM Blue Chip Fund 9.59% -29.45% 125.13% -- 02/04/87
AIM Capital Development Fund 25.85% 40.18% N/A 97.41% 06/17/96
AIM Charter Fund 16.78% -20.30% 121.30% -- 11/26/68
AIM Constellation Fund 14.06% -12.95% 91.96% -- 04/30/76
AIM Core Strategies Fund 13.83% N/A N/A -7.88% 12/31/01
AIM Dent Demographic Trends Fund 17.44% N/A N/A -25.52% 06/07/99
AIM Diversified Dividend Fund 21.18% N/A N/A 7.67% 12/31/01
AIM Emerging Growth Fund 30.00% N/A N/A -36.75% 03/31/00
AIM Large Cap Basic Value Fund 24.46% N/A N/A 23.66% 06/30/99
AIM Large Cap Growth Fund 15.13% -17.38% N/A -13.13% 03/01/99
AIM Mid Cap Growth Fund 24.59% N/A N/A -12.85% 11/01/99
AIM Select Basic Value Fund 29.40% N/A N/A 23.76% 08/30/02
AIM U.S. Growth Fund 12.37% N/A N/A 10.31% 08/30/02
AIM Weingarten Fund 15.20% -44.61% 58.45% -- 06/17/69
|
The cumulative total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 20.45% 7.64% N/A 15.98% 03/01/99
AIM Blue Chip Fund 10.33% -29.21% N/A 36.71% 10/01/96
AIM Capital Development Fund 27.26% 41.43% N/A 76.04% 10/01/96
AIM Charter Fund 17.66% -20.13% N/A 84.14% 06/26/95
AIM Constellation Fund 14.82% -12.51% N/A 0.82% 11/03/97
AIM Core Strategies Fund 15.42% N/A N/A -5.41% 12/31/01
AIM Dent Demographic Trends Fund 18.46% N/A N/A -25.23% 06/07/99
AIM Diversified Dividend Fund 22.34% N/A N/A 9.18% 12/31/01
AIM Emerging Growth Fund 31.78% N/A N/A -35.99% 03/31/00
AIM Large Cap Basic Value Fund 25.92% N/A N/A 11.05% 08/01/00
AIM Large Cap Growth Fund 16.12% -17.19% N/A -20.67% 04/05/99
AIM Mid Cap Growth Fund 26.13% N/A N/A -12.49% 11/01/99
AIM Select Basic Value Fund 31.93% N/A N/A 26.94% 08/30/02
AIM U.S. Growth Fund 13.95% N/A N/A 12.71% 08/30/02
AIM Weingarten Fund 15.97% -44.33% N/A 28.07% 06/26/95
|
The cumulative total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 24.63% 9.20% N/A 16.82% 03/01/99
AIM Blue Chip Fund 14.33% -27.74% N/A 1.18% 08/04/97
AIM Capital Development Fund 31.29% 43.46% N/A 46.98% 08/04/97
AIM Charter Fund 21.82% -18.66% N/A 10.55% 08/04/97
AIM Constellation Fund 18.83% -11.22% N/A -0.14% 08/04/97
AIM Core Strategies Fund 19.42% N/A N/A -2.54% 12/31/01
AIM Dent Demographic Trends Fund 22.46% N/A N/A -23.70% 06/07/99
AIM Diversified Dividend Fund 26.37% N/A N/A 12.08% 12/31/01
AIM Emerging Growth Fund 36.09% N/A N/A -34.75% 03/31/00
AIM Large Cap Basic Value Fund 29.82% N/A N/A 13.96% 08/01/00
AIM Large Cap Growth Fund 20.26% -15.41% N/A -19.78% 04/05/99
AIM Mid Cap Growth Fund 29.94% N/A N/A -10.70% 11/01/99
AIM Select Basic Value Fund 35.93% N/A N/A 30.94% 08/30/02
AIM U.S. Growth Fund 17.95% N/A N/A 16.71% 08/30/02
AIM Weingarten Fund 19.95% -43.48% N/A -20.43% 08/04/97
|
The cumulative total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004*
---------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 26.05% 12.08% 132.96% -- 05/01/84
AIM Blue Chip Fund 15.87% -25.84% 134.94% -- 02/04/87
AIM Capital Development Fund 32.97% 47.16% N/A 106.33% 06/17/96
AIM Charter Fund 23.27% -16.68% 129.13% -- 11/26/68
AIM Constellation Fund 20.34% -8.50% 99.78% -- 04/30/76
AIM Large Cap Basic Value Fund 31.45% N/A N/A 29.85% 06/30/99
AIM Large Cap Growth Fund 21.63% -13.15% N/A -8.71% 03/01/99
AIM Mid Cap Growth Fund 31.71% N/A N/A -8.56% 11/01/99
AIM Weingarten Fund 21.54% -41.99% 64.24% -- 06/17/69
|
* The returns shown for the one year period are the historical returns of the Funds' Class R shares. The returns shown for the five and ten year periods and since inception are the blended returns of the historical performance of the Funds' Class R shares since June 3, 2002 and the restated historical performance of the Funds' Class A shares (for periods prior to June 3, 2002) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares.
** The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the Funds' Class R shares is June 3, 2002.
The cumulative total returns for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE***
---------------------- ------ ------- -------- --------- ---------
AIM Blue Chip Fund* 16.17% -25.20% 138.67% -- 02/04/87
AIM Capital Development Fund** 33.21% 48.34% N/A 108.87% 06/17/96
AIM Large Cap Basic Value Fund* 31.84% N/A N/A 30.93% 06/30/99
AIM Large Cap Growth Fund* 22.30% -12.26% N/A -7.75% 03/01/99
|
* The returns shown for these periods are the blended returns of AIM Blue Chip Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Investor Class shares since September 30, 2003 and the restated historical performance of each Funds' Class A shares (for periods prior to September 30, 2003) at net asset value, and reflect the higher Rule 12b-1 fees applicable to the Class A shares.
** The returns shown for these periods are the restated historical performance of AIM Capital Development Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
*** The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the Funds' Investor Class shares (except Aim Capital Development Fund) is September 30, 2003. As of the date of this Statement of Additional Information, the Investor Class Shares of AIM Capital Development had not yet commenced operations.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS)
The average annual total returns (after taxes on distributions and including sales load) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 19.59% 0.17% 7.47% -- 05/01/84
AIM Blue Chip Fund 9.59% -6.74% 7.60% -- 02/04/87
AIM Capital Development Fund 25.40% 6.00% N/A 8.39% 06/17/96
AIM Charter Fund 16.75% -5.06% 6.57% -- 11/26/68
AIM Constellation Fund 14.06% -3.85% 5.58% -- 04/30/76
AIM Core Strategies Fund 13.78% N/A N/A -3.77% 12/31/01
AIM Dent Demographic Trends Fund 17.44% N/A N/A -5.84% 06/07/99
AIM Diversified Dividend Fund 20.91% N/A N/A 3.12% 12/31/01
AIM Emerging Growth Fund 30.00% N/A N/A -11.04% 03/31/00
AIM Large Cap Basic Value Fund 24.46% N/A N/A 4.18% 06/30/99
AIM Large Cap Growth Fund 15.13% -3.75% N/A -2.69% 03/01/99
AIM Mid Cap Growth Fund 24.59% N/A N/A -3.01% 11/01/99
AIM Select Basic Value Fund 29.40% N/A N/A 13.34% 08/30/02
AIM U.S. Growth Fund 11.47% N/A N/A 5.38% 08/30/02
AIM Weingarten Fund 15.20% -12.09% 2.38% -- 06/17/69
|
The average annual total returns (after taxes on distributions and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 20.45% 0.17% N/A 1.64% 03/01/99
AIM Blue Chip Fund 10.33% -6.68% N/A 3.80% 10/01/96
AIM Capital Development Fund 26.76% 6.14% N/A 7.07% 10/01/96
AIM Charter Fund 17.66% -5.03% N/A 5.60% 06/26/95
AIM Constellation Fund 14.82% -3.80% N/A -1.15% 11/03/97
AIM Core Strategies Fund 15.36% N/A N/A -2.68% 12/31/01
AIM Dent Demographic Trends Fund 18.46% N/A N/A -5.76% 06/07/99
AIM Diversified Dividend Fund 22.21% N/A N/A 3.80% 12/31/01
AIM Emerging Growth Fund 31.78% N/A N/A -10.78% 03/31/00
AIM Large Cap Basic Value Fund 25.92% N/A N/A 2.79% 08/01/00
AIM Large Cap Growth Fund 16.12% -3.70% N/A -4.47% 04/05/99
AIM Mid Cap Growth Fund 26.13% N/A N/A -2.92% 11/01/99
AIM Select Basic Value Fund 31.93% N/A N/A 15.07% 08/30/02
AIM U.S. Growth Fund 12.99% N/A N/A 6.72% 08/30/02
AIM Weingarten Fund 15.97% -12.06% N/A 0.58% 06/26/95
|
The average annual total returns (after taxes on distributions and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 24.63% 0.48% N/A 1.79% 03/01/99
AIM Blue Chip Fund 14.33% -6.29% N/A 0.08% 08/04/97
AIM Capital Development Fund 30.78% 6.46% N/A 5.13% 08/04/97
AIM Charter Fund 21.82% -4.67% N/A 0.37% 08/04/97
AIM Constellation Fund 18.83% -3.51% N/A -1.25% 08/04/97
AIM Core Strategies Fund 19.36% N/A N/A -1.41% 12/31/01
AIM Dent Demographic Trends Fund 22.46% N/A N/A -5.37% 06/07/99
AIM Diversified Dividend Fund 26.24% N/A N/A 4.98% 12/31/01
AIM Emerging Growth Fund 36.09% N/A N/A -10.35% 03/31/00
AIM Large Cap Basic Value Fund 29.82% N/A N/A 3.50% 08/01/00
AIM Large Cap Growth Fund 20.26% -3.29% N/A -4.26% 04/05/99
AIM Mid Cap Growth Fund 29.94% N/A N/A -2.49% 11/01/99
AIM Select Basic Value Fund 35.93% N/A N/A 17.24% 08/30/02
AIM U.S. Growth Fund 16.99% N/A N/A 9.00% 08/30/02
AIM Weingarten Fund 19.95% -11.78% N/A -4.97% 08/04/97
|
The average annual total returns (after taxes on distributions) for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE***
---------------------- ------ ------- -------- --------- ---------
AIM Blue Chip Fund* 16.17% -5.64% 8.23% -- 02/04/87
AIM Capital Development Fund** 32.73% 7.21% N/A 9.17% 06/17/96
AIM Large Cap Basic Value Fund* 31.84% N/A N/A 5.42% 06/30/99
AIM Large Cap Growth Fund* 22.30% -2.58% N/A -1.55% 03/01/99
|
* The returns shown for these periods are the blended returns of AIM Blue Chip Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Investor Class shares since September 30, 2003 and the restated historical performance of each Funds' Class A shares (for periods prior to September 30, 2003) at net asset value, and reflect the higher Rule 12b-1 fees applicable to the Class A shares.
** The returns shown for these periods are the restated historical performance of AIM Capital Development Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
*** The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the Funds' Investor Class shares (except for AIM Capital Development Fund) is September 30, 2003. As of the date of this Statement of Additional Information, the Investor Class Shares of AIM Capital Development Fund had not yet commenced operations.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION)
The average annual total returns (after taxes on distributions and redemption and including sales load) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 12.74% 1.14% 7.31% -- 05/01/84
AIM Blue Chip Fund 6.23% -5.60% 6.96% -- 02/04/87
AIM Capital Development Fund 17.37% 5.57% N/A 7.64% 06/17/96
AIM Charter Fund 10.96% -3.87% 6.33% -- 11/26/68
AIM Constellation Fund 9.14% -2.32% 5.64% -- 04/30/76
AIM Core Strategies Fund 8.99% N/A N/A -3.13% 12/31/01
AIM Dent Demographic Trends Fund 11.33% N/A N/A -4.87% 06/07/99
AIM Diversified Dividend Fund 13.92% N/A N/A 2.71% 12/31/01
AIM Emerging Growth Fund 19.50% N/A N/A -8.98% 03/31/00
AIM Large Cap Basic Value Fund 15.90% N/A N/A 3.65% 06/30/99
AIM Large Cap Growth Fund 9.84% -3.15% N/A -2.27% 03/01/99
AIM Mid Cap Growth Fund 15.99% N/A N/A -2.54% 11/01/99
AIM Select Basic Value Fund 19.11% N/A N/A 11.46% 08/30/02
AIM U.S. Growth Fund 8.02% N/A N/A 4.75% 08/30/02
AIM Weingarten Fund 9.88% -8.94% 3.28% -- 06/17/69
|
The average annual total returns (after taxes on distributions and redemption and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 13.30% 1.20% N/A 2.43% 03/01/99
AIM Blue Chip Fund 6.71% -5.55% N/A 3.42% 10/01/96
AIM Capital Development Fund 18.36% 5.72% N/A 6.46% 10/01/96
AIM Charter Fund 11.48% -3.83% N/A 5.46% 06/26/95
AIM Constellation Fund 9.63% -2.21% N/A -0.03% 11/03/97
AIM Core Strategies Fund 10.02% N/A N/A -2.21% 12/31/01
AIM Dent Demographic Trends Fund 12.00% N/A N/A -4.81% 06/07/99
AIM Diversified Dividend Fund 14.58% N/A N/A 3.26% 12/31/01
AIM Emerging Growth Fund 20.66% N/A N/A -8.77% 03/31/00
AIM Large Cap Basic Value Fund 16.85% N/A N/A 2.39% 08/01/00
AIM Large Cap Growth Fund 10.48% -3.11% N/A -3.74% 04/05/99
AIM Mid Cap Growth Fund 16.98% N/A N/A -2.46% 11/01/99
AIM Select Basic Value Fund 20.76% N/A N/A 12.95% 08/30/02
AIM U.S. Growth Fund 9.04% N/A N/A 5.91% 08/30/02
AIM Weingarten Fund 10.38% -8.84% N/A 1.81% 06/26/95
|
The average annual total returns (after taxes on distributions and redemption and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ---------
AIM Aggressive Growth Fund 16.01% 1.45% N/A 2.55% 03/01/99
AIM Blue Chip Fund 9.31% -5.24% N/A 0.11% 08/04/97
AIM Capital Development Fund 20.97% 5.99% N/A 4.75% 08/04/97
AIM Charter Fund 14.19% -3.54% N/A 0.82% 08/04/97
AIM Constellation Fund 12.24% -1.98% N/A -0.15% 08/04/97
AIM Core Strategies Fund 12.62% N/A N/A -1.13% 12/31/01
AIM Dent Demographic Trends Fund 14.60% N/A N/A -4.49% 06/07/99
AIM Diversified Dividend Fund 17.20% N/A N/A 4.27% 12/31/01
AIM Emerging Growth Fund 23.46% N/A N/A -8.43% 03/31/00
AIM Large Cap Basic Value Fund 19.38% N/A N/A 3.01% 08/01/00
AIM Large Cap Growth Fund 13.17% -2.77% N/A -3.57% 04/05/99
AIM Mid Cap Growth Fund 19.46% N/A N/A -2.10% 11/01/99
AIM Select Basic Value Fund 23.36% N/A N/A 14.82% 08/30/02
AIM U.S. Growth Fund 11.64% N/A N/A 7.86% 08/30/02
AIM Weingarten Fund 12.97% -8.63% N/A -2.90% 08/04/97
|
The average annual total returns (after taxes on distributions and redemption) for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
--------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE***
---------------------- ------ ------- -------- --------- ---------
AIM Blue Chip Fund* 10.51% -4.71% 7.54% -- 02/04/87
AIM Capital Development Fund** 22.19% 6.63% N/A 8.35% 06/17/96
AIM Large Cap Basic Value Fund* 20.69% N/A N/A 4.73% 06/30/99
AIM Large Cap Growth Fund* 14.49% -2.18% N/A -1.31% 03/01/99
|
* The returns shown for these periods are the blended returns of AIM Blue Chip Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Investor Class shares since September 30, 2003 and the restated historical performance of each Funds' Class A shares (for periods prior to September 30, 2003) at net asset value, and reflect the higher Rule 12b-1 fees applicable to the Class A shares.
** The returns shown for these periods are the restated historical performance of AIM Capital Development Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
*** The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the Funds' Investor Class shares (except AIM Capital Development Fund) is September 30, 2003. As of the date of this Statement of Additional Information, the Investor Class Shares of AIM Capital Development Fund had not yet commenced operations.
APPENDIX N-1
PENDING LITIGATION ALLEGING MARKET TIMING
The following civil lawsuits, including purported class action and shareholder derivative suits involve, depending on the lawsuit, one or more AIM or INVESCO Funds, IFG, AIM, AIM Management, AMVESCAP and/or certain related entities and individuals and are related to the three regulatory actions concerning market timing activity in the INVESCO Funds that have been filed by the SEC, the Attorney General of the State of New York and the State of Colorado against these parties. These lawsuits either have been served or have had service of process waived as of September 23, 2004. All of these lawsuits have been conditionally or finally transferred to the United States District Court for the District of Maryland in accordance with the directive of the Judicial Panel on Multidistrict Litigation (Case No. 04-MD-15864; In Re AIM, Artisan, INVESCO, Strong and T. Rowe Price Mutual Fund Litigation). The plaintiffs in one of these lawsuits (Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc. et al.) continue to seek remand to state court.
RICHARD LEPERA, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED,
V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., INVESCO BOND
FUNDS, INC., INVESCO SECTOR FUNDS, INC. AND DOE DEFENDANTS 1-100, in
the District Court, City and County of Denver, Colorado, (Civil Action
No. 03-CV-7600), filed on October 2, 2003. This claim alleges: common
law breach of fiduciary duty; common law breach of contract; and common
law tortious interference with contract. The plaintiff in this case is
seeking: compensatory and punitive damages; injunctive relief;
disgorgement of revenues and profits; and costs and expenses, including
counsel fees and expert fees.
MIKE SAYEGH, ON BEHALF OF THE GENERAL PUBLIC, V. JANUS CAPITAL CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND, EDWARD J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT MANAGEMENT LLC, CANARY CAPITAL PARTNERS LTD., KAPLAN & CO. SECURITIES
INC., BANK ONE CORPORATION, BANC ONE INVESTMENT ADVISORS, THE ONE GROUP
MUTUAL FUNDS, BANK OF AMERICA CORPORATION, BANC OF AMERICA CAPITAL
MANAGEMENT LLC, BANC OF AMERICA ADVISORS LLC, NATIONS FUND INC., ROBERT
H. GORDON, THEODORE H. SIHPOL III, CHARLES D. BRYCELAND, SECURITY TRUST
COMPANY, STRONG CAPITAL MANAGEMENT INC., JB OXFORD & COMPANY, ALLIANCE
CAPITAL MANAGEMENT HOLDING L.P., ALLIANCE CAPITAL MANAGEMENT L.P.,
ALLIANCE CAPITAL MANAGEMENT CORPORATION, AXA FINANCIAL INC.,
ALLIANCEBERNSTEIN REGISTRANTS, GERALD MALONE, CHARLES SCHAFFRAN, MARSH
& MCLENNAN COMPANIES, INC., PUTNAM INVESTMENTS TRUST, PUTNAM INVESTMENT
MANAGEMENT LLC, PUTNAM INVESTMENT FUNDS, AND DOES 1-500, in the
Superior Court of the State of California, County of Los Angeles (Case
No. BC304655), filed on October 22, 2003 and amended on December 17,
2003 to substitute INVESCO Funds Group, Inc. and Raymond R. Cunningham
for unnamed Doe defendants. This claim alleges unfair business
practices and violations of Sections 17200 and 17203 of the California
Business and Professions Code. The plaintiff in this case is seeking:
injunctive relief; restitution, including pre-judgment interest; an
accounting to determine the amount to be returned by the defendants and
the amount to be refunded to the public; the creation of an
administrative process whereby injured customers of the defendants
receive their losses; and counsel fees.
RAJ SANYAL, DERIVATIVELY 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 on 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.
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 ("Investment
Company Act"), and common law breach of fiduciary duty. The plaintiff
in this case is seeking damages and 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 of 1933 (the "Securities Act"); Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 (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; counsel fees and expert fees;
and other relief.
JERRY FATTAH, CUSTODIAN FOR BASIM FATTAH, 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 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-F-2456), filed on December 4, 2003. This claim
alleges violations of: Sections 11 and 15 of Securities Act; Sections
10(b) and 20(a) of 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.
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; 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.
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 common law
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 counsel fees and expert fees; and equitable
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 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, 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.
JOSEPH R. RUSSO, 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 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-10045), filed on December 18, 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.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC.,
AMVESCAP NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON NEBEKER,
JEFFREY G. CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R. CUNNINGHAM,
AND DOES 1-100, in the United States District Court, District of
Colorado (Civil Action No. 03-M-2604), filed on December 24, 2003. This
claim alleges violations of Sections 404, 405 and 406B of the Employee
Retirement Income Security Act ("ERISA"). The plaintiffs in this case
are seeking: declarations that the defendants breached their ERISA
fiduciary duties and that they are not entitled to the protection of
Section 404(c)(1)(B) of ERISA; an order compelling the defendants to
make good all losses to a particular retirement plan described in this
case (the "Retirement Plan") resulting from the defendants' breaches of
their fiduciary duties, including losses to the Retirement Plan
resulting from imprudent investment of the Retirement Plan's assets,
and to restore to the Retirement Plan all profits the defendants made
through use of the Retirement Plan's assets, and to restore to the
Retirement Plan all profits which the participants would have made if
the defendants had fulfilled their fiduciary obligations; damages on
behalf of the Retirement Plan; imposition of a constructive trust,
injunctive relief, damages suffered by the Retirement Plan, to be
allocated proportionately to the participants in the Retirement Plan;
restitution 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.
ROBERT S. BALLAGH, JR., 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. 04-MK-0152), filed on January
28, 2004. 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; counsel fees and expert fees;
and other relief.
JONATHAN GALLO, 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. 04-MK-0151), filed on January 28, 2004. 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; counsel fees and expert fees; and other relief.
EILEEN CLANCY, 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 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, 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 AND THOMAS KOLBE, in the United
States District Court, Southern District of New York (Civil Action No.
04-CV-0713), filed on January 30, 2004. This claim alleges violations
of Sections 11 and 15 of the Securities Act. The plaintiffs in this
case are seeking: compensatory damages, rescission; return of fees
paid; and other costs and expenses, including counsel fees and expert
fees.
SCOTT WALDMAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED,
V. INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND, INVESCO EUROPEAN
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, 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, AND
RAYMOND CUNNINGHAM, in the United States District Court, Southern
District of New York (Civil Action No. 04-CV-00915), filed on February
3, 2004. This claim alleges violations of Sections 11 and 15 of the
Securities Act and common law breach of fiduciary duty. The plaintiffs
in this case are seeking
compensatory damages; injunctive relief; and 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. This claim alleges: common law breach of
fiduciary duty; breach of contract; and tortious interference with
contract. The plaintiffs in this case are seeking: injunctive relief;
damages; disgorgement; and costs and expenses, including counsel fees
and expert fees.
HENRY KRAMER, DERIVATIVELY ON BEHALF OF INVESCO ENERGY FUND, INVESCO
STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO
FUNDS GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., DEFENDANTS, AND
INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL
FUNDS, NOMINAL DEFENDANTS, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0397), filed on March 4,
2004. This claim alleges violations of Section 36(b) of the Investment
Company Act and common law breach of fiduciary duty. The plaintiff in
this case is seeking damages and costs and expenses, including counsel
fees and expert fees.
CYNTHIA L. ESSENMACHER, DERIVATIVELY ON BEHALF OF THE INVESCO DYNAMICS
FUND AND THE REMAINING "INVESCO FUNDS" V. INVESCO FUNDS GROUPS, INC.,
AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND CUNNINGHAM, TIMOTHY
MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI, DEFENDANTS, AND INVESCO
DYNAMICS FUND AND THE "INVESCO FUNDS", NOMINAL DEFENDANTS, in the
United States District Court, District of Delaware (Civil Action No.
04-CV-188), filed on March 29, 2004. This claim alleges: violations of
Section 36(b) of the Investment Company Act; violations of Section 206
of the Advisers Act; common law breach of fiduciary duty; and civil
conspiracy. The plaintiff in this case is seeking: damages; injunctive
relief; and costs and expenses, including counsel fees and expert fees.
APPENDIX N-2
PENDING LITIGATION ALLEGING EXCESSIVE INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM or INVESCO Funds, IFG and/or AIM and allege that the defendants inadequately employed fair value pricing. These lawsuits either have been served or have had service of process waived as of September 23, 2004.
T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON SMITH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. T. ROWE PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE INTERNATIONAL, INC., ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED PARTNERSHIP, AIM INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 2003-L-001253), filed on September 23, 2003. This claim alleges: common law breach of duty and common law negligence and gross negligence. The plaintiffs in this case are seeking: compensatory and punitive damages; interest; and attorneys' fees and costs.
JOHN BILSKI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC., INVESCO INTERNATIONAL
FUNDS, INC., INVESCO FUNDS GROUP, INC., T. ROWE PRICE INTERNATIONAL
FUNDS, INC. AND T. ROWE PRICE INTERNATIONAL, INC., in the United States
District Court, Southern District of Illinois (East St. Louis) (Case
No. 03-772), filed on November 19, 2003. This claim alleges: violations
of Sections 36(a) and 36(b) of the Investment Company Act of 1940;
common law breach of duty; and common law negligence and gross
negligence. The plaintiff in this case is seeking: compensatory and
punitive damages; interest; and attorneys' fees and costs.
APPENDIX N-3
PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND DISTRIBUTION FEES
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, IINA, ADI and/or INVESCO Distributors and allege that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and, in some cases, also allege that the defendants adopted unlawful distribution plans. These lawsuits either have been served or have had service of process waived as of September 23, 2004. All of these lawsuits have been transferred to the United States District Court for the Southern District of Texas, Houston Division by order of the applicable United States District Court in which they were initially filed. The plaintiff in one of these lawsuits (Ronald Kondracki v. AIM Advisors, Inc. and AIM Distributor, Inc.) has challenged this order.
RONALD KONDRACKI V. AIM ADVISORS, INC. AND AIM DISTRIBUTOR, INC., in
the United States District Court for the Southern District of Illinois
(Civil Action No. 04-CV-263-DRH), filed on April 16, 2004. This claim
alleges violations of Section 36(b) of the Investment Company Act of
1940 (the "Investment Company Act"). The plaintiff in this case is
seeking: damages; injunctive relief; prospective relief in the form of
reduced fees; rescission of the investment advisory agreements and
distribution plans; and costs and expenses, including counsel fees.
DOLORES BERDAT, MARVIN HUNT, MADELINE HUNT, RANDAL C. BREVER AND RHONDA
LECURU V. INVESCO FUNDS GROUP, INC., INVESCO INSTITUTIONAL (N.A.),
INC., INVESCO DISTRIBUTORS, INC., AIM ADVISORS, INC. AND AIM
DISTRIBUTORS, INC., in the United States District Court for the Middle
District of Florida, Tampa Division (Case No. 8:04-CV-978-T24-TBM),
filed on April 29, 2004. This claim alleges violations of Sections
36(b) and 12(b) of the Investment Company Act. The plaintiffs in this
case are seeking: damages; injunctive relief; rescission of the
investment advisory agreements and distribution plans; and costs and
expenses, including counsel fees.
FERDINANDO PAPIA, FRED DUNCAN, GRACE GIAMANCO, JEFFREY S. THOMAS,
COURTNEY KING, KATHLEEN BLAIR, HENRY BERDAT, RUTH MOCCIA, MURRAY
BEASLEY AND FRANCES J. BEASLEY V. A I M ADVISORS, INC. AND A I M
DISTRIBUTORS, INC., in the United States District Court for the Middle
District of Florida, Tampa Division (Case No. 8:04-CV-977-T17-MSS),
filed on April 29, 2004. This claim alleges violations of Sections
36(b) and 12(b) of the Investment Company Act. The plaintiffs in this
case are seeking: damages; injunctive relief; rescission of the
investment advisory agreements and distribution plans; and costs and
expenses, including counsel fees.
APPENDIX N-4
PENDING LITIGATION ALLEGING IMPROPER DISTRIBUTION FEES
CHARGED TO CLOSED FUNDS
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, ADI and/or certain of the trustees of the AIM and INVESCO Funds and allege that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits either have been served or have had service of process waived as of September 23, 2004.
LAWRENCE ZUCKER, ON BEHALF OF AIM SMALL CAP GROWTH FUND AND AIM LIMITED
MATURITY TREASURY FUND, V. A I M ADVISORS, INC., in the United States
District Court, Southern District of Texas, Houston Division (Civil
Action No. H-03-5653), filed on December 10, 2003. This claim alleges
violations of Section 36(b) of the Investment Company Act of 1940 (the
"Investment Company Act") and common law breach of fiduciary duty. The
plaintiff in this case is seeking: damages; injunctive relief; and
costs and expenses, including counsel fees.
STANLEY LIEBER, ON BEHALF OF INVESCO BALANCED FUND, INVESCO CORE EQUITY
FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO EUROPEAN
FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
FUND, INVESCO GROWTH & INCOME FUND, INVESCO GROWTH FUND, INVESCO HEALTH
SCIENCE FUND, INVESCO HIGH YIELD FUND, INVECO INTERNATIONAL BLUE CHIP
VALUE FUND, INVESCO LEISURE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SELECT INCOME FUND, INVESCO TAX
FREE BOND FUND, INVESCO TECHNOLOGY FUND, INVESCO TELECOMMUNICATIONS
FUND, INVESCO TOTAL RETURN FUND, INVESCO US GOVERNMENT SECURITIES FUND,
INVESCO UTILITIES FUND, INVESCO VALUE EQUITY FUND, V. INVESCO FUNDS
GROUP, INC. AND A I M ADVISORS, INC., in the United States District
Court, Southern District of Texas, Houston Division (Civil Action No.
H-03-5744), filed on December 17, 2003. This claim alleges violations
of Section 36(b) of the Investment Company Act and common law breach of
fiduciary duty. The plaintiff in this case is seeking: damages;
injunctive relief; and costs and expenses, including counsel fees.
HERMAN C. RAGAN, DERIVATIVELY, AND ON BEHALF OF HIMSELF AND ALL OTHERS
SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., AND A I M
DISTRIBUTORS, INC., in the United States District Court for the
Southern District of Georgia, Dublin Division (Civil Action No.
CV304-031), filed on May 6, 2004. This claim alleges violations of:
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 thereunder; Sections 17(a)(2) and 17(a)(3) of the
Securities Act of 1933; and Section 36(b) of the Investment Company
Act. This claim also alleges controlling person liability, within the
meaning of Section 20 of the Exchange Act against ADI. The plaintiff in
this case is seeking: damages and costs and expenses, including counsel
fees.
APPENDIX N-5
PENDING LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES
AND DIRECTED-BROKERAGE ARRANGEMENTS
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM and INVESCO Funds and allege that the defendants improperly used the assets of the AIM and INVESCO Funds to pay brokers to aggressively push the AIM and INVESCO Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them
as brokerage commissions. These lawsuits either have been served or have had service of process waived as of September 23, 2004.
JOY D. BEASLEY AND SHEILA MCDAID, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS
GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT
H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT,
ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING,
PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S.
SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND,
AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED
FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT
FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC
TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND
FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN
SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE
GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL
FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH
FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM
LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE
FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM
MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II
FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM
SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
WEINGARTEN FUND, 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,
NOMINAL DEFENDANTS, in the United States District Court for the
District of Colorado (Civil Action No. 04-B-0958), filed on May 10,
2004. The plaintiffs voluntarily dismissed this case in Colorado and
re-filed it on July 2, 2004 in the United States District Court for the
Southern District of Texas, Houston Division (Civil Action H-04-2589).
This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the
Investment Company Act of 1940 (the "Investment Company Act") and
violations of Sections 206 and 215 of the Investment Advisers Act of
1940 (the "Advisers Act"). The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: compensatory
and punitive damages; rescission of certain Funds' advisory agreements
and distribution plans and recovery of all fees paid; an accounting of
all fund-related fees, commissions and soft dollar payments;
restitution of all unlawfully or discriminatorily obtained fees and
charges; and attorneys' and experts' fees.
RICHARD TIM BOYCE V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY,
AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE
GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC
BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT
DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED
DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM
EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM
INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE
CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND,
AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP
GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM
OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY
FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND
FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM
TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK
ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
WEINGARTEN FUND, 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,
NOMINAL DEFENDANTS, in the United States District Court for the
District of Colorado (Civil Action No. 04-N-0989), filed on May 13,
2004. The plaintiff voluntarily dismissed this case in Colorado and
re-filed it on July 1, 2004 in the United States District Court for the
Southern District of Texas, Houston Division (Civil Action H-04-2587).
This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the
Investment Company Act and violations of Sections 206 and 215 of the
Advisers Act. The claim also alleges common law breach of fiduciary
duty. The plaintiff in this case is seeking: compensatory and punitive
damages; rescission of certain Funds' advisory agreements and
distribution plans and recovery of all fees paid; an accounting of all
fund-related fees, commissions and soft dollar payments; restitution of
all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.
KEHLBECK TRUST DTD 1-25-93, BILLY B. KEHLBECK AND DONNA J. KEHLBECK, TTEES V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM
INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL
VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP
BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID
CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND,
AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES
III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT
EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM
SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN
BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK
SMALL COMPANIES FUND, AIM WEINGARTEN FUND, 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 MULTI-SECTOR FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States
District Court for the Southern District of Texas, Houston Division
(Civil Action No. H-04-2802), filed on July 9, 2004. This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment Company
Act and violations of Sections 206 and 215 of the Advisers Act. The
claim also alleges common law breach of fiduciary duty. The plaintiff
in this case is seeking: compensatory and punitive damages; rescission
of certain Funds' advisory agreements and distribution plans and
recovery of all fees paid; an accounting of all fund-related fees,
commissions and soft dollar payments; restitution of all unlawfully or
discriminatorily obtained fees and charges; and attorneys' and experts'
fees.
JANICE R. FRY, BOB J. FRY, JAMES P. HAYES, VIRGINIA L. MAGBUAL, HENRY W. MEYER AND GEORGE ROBERT PERRY V. AIM MANAGEMENT GROUP INC., INVESCO
FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK
ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
WEINGARTEN FUND, 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 MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
NOMINAL DEFENDANTS, in the United States District Court for the
Southern District of Texas, Houston Division (Civil Action No.
H-04-2832), filed on July 12, 2004. This claim alleges violations of
Sections 34(b), 36(b) and 48(a) of the Investment Company Act and
violations of Sections 206 and 215 of the Advisers Act. The claim also
alleges common law breach of fiduciary duty. The plaintiff in this case
is seeking: compensatory and punitive damages; rescission of certain
Funds' advisory agreements and distribution plans and recovery of all
fees paid; an accounting of all fund-related fees, commissions and soft
dollar payments; restitution of all unlawfully or discriminatorily
obtained fees and charges; and attorneys' and experts' fees.
ROBERT P. APU, SUZANNE K. APU, MARINA BERTI, KHANH DINH, FRANK KENDRICK, EDWARD A. KREZEL, DAN B. LESIUK, JOHN B. PERKINS, MILDRED E. RUEHLMAN, LOUIS E. SPERRY, J. DORIS WILLSON AND ROBERT W. WOOD V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, 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 MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States
District Court for the Southern District of Texas, Houston Division
(Civil Action No. H-04-2884), filed on July 15, 2004. This claim
alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment
Company Act and violations of Sections 206 and 215 of the Advisers Act.
The claim also alleges common law breach of fiduciary duty. The
plaintiff in this case is seeking: compensatory and punitive damages;
rescission of certain Funds' advisory agreements and distribution plans
and recovery of all fees paid; an accounting of all fund-related fees,
commissions and soft dollar payments; restitution of all unlawfully or
discriminatorily obtained fees and charges; and attorneys' and experts'
fees.
HARVEY R. BENDIX, CVETAN GEORGIEV, DAVID M. LUCOFF, MICHAEL E.
PARMELEE, TRUSTEE OF THE HERMAN S. AND ESPERANZA A.. DRAYER RESIDUAL
TRUST U/A 1/22/83 AND STANLEY S. STEPHENSON, TRUSTEE OF THE STANLEY J.
STEPHENSON TRUST V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP,
INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H.
GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT
R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR,
AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM
ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND,
AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND,
AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS
FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM
EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL
COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH
FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH
CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP
VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP
BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID
CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND,
AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES
III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT
EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM
SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN
BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK
SMALL COMPANIES FUND, AIM WEINGARTEN FUND, 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 MULTI-SECTOR FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States
District Court for the Southern District of Texas, Houston Division
(Civil Action No. H-04-3030), filed on July 27, 2004. This claim
alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment
Company Act and violations of Sections 206 and 215 of the Advisers Act.
The claim also alleges common law breach of fiduciary duty. The
plaintiff in this case is seeking: compensatory and punitive damages;
rescission of certain Funds' advisory agreements and distribution plans
and recovery of all fees paid; an accounting of all fund-related fees,
commissions
and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees.
FINANCIAL STATEMENTS
Pursuant to Rule 3-03(d) of Regulation S-X unaudited financials for the period ended April 30, 2004 for Registrant's portfolios have been included in addition to the portfolios' audited financials for the period ended October 31, 2003. Such financials reflect all adjustments which are of a normal recurring nature and which are, in the opinion of management, necessary to a fair statement of the results for the periods presented.
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 Basic Value II Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Basic Value II 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, and the statements of changes in net assets and financial highlights for each of the two 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.
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 Basic Value II Fund as of October 31, 2003, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the two 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-15
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
------------------------------------------------------------------
COMMON STOCKS-99.98%
ADVERTISING-6.20%
Interpublic Group of Cos., Inc. (The) 2,500 $ 37,200
------------------------------------------------------------------
Omnicom Group Inc. 450 35,910
==================================================================
73,110
==================================================================
AEROSPACE & DEFENSE-1.82%
Honeywell International Inc. 700 21,427
==================================================================
APPAREL RETAIL-2.59%
Gap, Inc. (The) 1,600 30,528
==================================================================
BUILDING PRODUCTS-2.84%
American Standard Cos. Inc.(a) 350 33,495
==================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.61%
Ceridian Corp.(a) 1,400 29,400
------------------------------------------------------------------
First Data Corp. 700 24,990
==================================================================
54,390
==================================================================
DIVERSIFIED BANKS-2.52%
Bank One Corp. 700 29,715
==================================================================
DIVERSIFIED CAPITAL MARKETS-3.05%
J.P. Morgan Chase & Co. 1,000 35,900
==================================================================
DIVERSIFIED COMMERCIAL SERVICES-4.87%
Cendant Corp.(a) 2,000 40,860
------------------------------------------------------------------
H&R Block, Inc. 350 16,481
==================================================================
57,341
==================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.93%
Waters Corp.(a) 1,100 34,573
==================================================================
|
FS-16
MARKET
SHARES VALUE
------------------------------------------------------------------
EMPLOYMENT SERVICES-2.20%
Robert Half International Inc.(a) 1,100 25,971
==================================================================
ENVIRONMENTAL SERVICES-3.08%
Waste Management, Inc. 1,400 36,288
==================================================================
FOOD RETAIL-3.88%
Kroger Co. (The)(a) 1,650 28,858
------------------------------------------------------------------
Safeway Inc.(a) 800 16,880
==================================================================
45,738
==================================================================
|
------------------------------------------------------------------
MARKET
SHARES VALUE
GENERAL MERCHANDISE STORES-2.02%
Target Corp. 600 $ 23,844
==================================================================
HEALTH CARE DISTRIBUTORS-4.58%
Cardinal Health, Inc. 450 26,703
------------------------------------------------------------------
McKesson Corp. 900 27,243
==================================================================
53,946
==================================================================
HEALTH CARE FACILITIES-3.69%
HCA Inc. 400 15,300
------------------------------------------------------------------
Universal Health Services, Inc.-Class B(a) 600 28,230
==================================================================
43,530
==================================================================
HEALTH CARE SERVICES-2.90%
IMS Health Inc. 1,450 34,118
==================================================================
HOTELS, RESORTS & CRUISE LINES-2.86%
Starwood Hotels & Resorts Worldwide, Inc. 1,000 33,730
==================================================================
INDUSTRIAL CONGLOMERATES-4.07%
Tyco International Ltd. (Bermuda) 2,300 48,024
==================================================================
INVESTMENT BANKING & BROKERAGE-5.02%
Merrill Lynch & Co., Inc. 1,000 59,200
==================================================================
LEISURE PRODUCTS-3.02%
Brunswick Corp. 1,200 35,604
==================================================================
MANAGED HEALTH CARE-2.68%
Aetna Inc. 550 31,576
==================================================================
|
FS-17
MARKET
SHARES VALUE
------------------------------------------------------------------
OIL & GAS DRILLING-3.64%
Pride International, Inc.(a) 1,450 23,751
------------------------------------------------------------------
Transocean Inc. (Cayman Island)(a) 1,000 19,190
==================================================================
42,941
==================================================================
OIL & GAS EQUIPMENT & SERVICES-1.33%
Weatherford International Ltd. (Bermuda)(a) 450 15,638
==================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-4.42%
Citigroup Inc. 1,100 52,140
==================================================================
PHARMACEUTICALS-3.19%
Aventis S.A. (France) 320 16,886
------------------------------------------------------------------
Wyeth 470 20,746
==================================================================
37,632
==================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE-2.60%
ACE Ltd. (Cayman Island) 850 $ 30,600
==================================================================
SEMICONDUCTOR EQUIPMENT-3.33%
Novellus Systems, Inc.(a) 950 39,226
==================================================================
SYSTEMS SOFTWARE-4.39%
Computer Associates International, Inc. 2,200 51,744
==================================================================
THRIFTS & MORTGAGE FINANCE-5.65%
Fannie Mae 560 40,146
------------------------------------------------------------------
Radian Group Inc. 500 26,450
==================================================================
66,596
==================================================================
Total Domestic Common Stocks (Cost
$963,353) 1,178,565
==================================================================
TOTAL INVESTMENTS-99.98% (Cost $963,353) 1,178,565
==================================================================
OTHER ASSETS LESS LIABILITIES-0.02% 260
==================================================================
NET ASSETS-100.00% $1,178,825
__________________________________________________________________
==================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
See Notes to Financial Statements.
FS-18
AIM Basic Value II
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
Assets:
Investments, at market value (cost $963,353) $ 1,178,565
-----------
Cash 7,025
-----------
Receivables for:
Dividends 703
-----------
Amount due from advisor 9,475
-----------
Investment for deferred compensation plan 3,462
-----------
Other assets 99
===========
Total assets 1,199,329
===========
Liabilities:
Payables for:
Deferred compensation plan 3,462
-----------
Accrued trustees' fees 567
-----------
Accrued transfer agent fees 19
-----------
Accrued operating expenses 16,456
===========
Total liabilities 20,504
===========
Net assets applicable to shares outstanding $ 1,178,825
===========
Net assets consist of:
Shares of beneficial interest $ 995,507
-----------
Undistributed net investment income (loss) (3,792)
-----------
Undistributed net realized gain (loss) from investment securities
and foreign currencies (28,102)
-----------
Unrealized appreciation of investment securities 215,212
-----------
$ 1,178,825
===========
Net Assets:
Class A $ 471,527
===========
Class B $ 353,649
===========
Class C $ 353,649
===========
Shares outstanding, $0.001 par value per share, unlimited number of shares authorized:
Class A 40,477
===========
Class B 30,357
===========
Class C 30,357
===========
Class A :
Net asset value per share $ 11.65
-----------
Offering price per share:
(Net asset value of $11.65 / 94.50%) $ 12.33
===========
Class B :
Net asset value and offering price per share $ 11.65
===========
Class C :
Net asset value and offering price per share $ 11.65
===========
|
See Notes to Financial Statements.
FS-19
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
Investment income:
Dividends $ 10,127
---------
Expenses:
Advisory fees 7,610
---------
Administrative services fees 50,000
---------
Custodian fees 2,064
---------
Distribution fees:
Class A 1,420
---------
Class B 3,044
---------
Class C 3,044
---------
Transfer agent fees 32
---------
Trustees' fees 8,856
---------
Printing and postage fees 5,518
---------
Professional fees 24,419
---------
Other 2,174
=========
Total expenses 108,181
=========
Less: Fees waived, expenses reimbursed and expense offset arrangements (90,438)
=========
Net expenses 17,743
=========
Net investment income (loss) (7,616)
=========
Realized and unrealized gain (loss) from investment securities and foreign
currencies:
Net realized gain (loss) from:
Investment securities (7,764)
---------
Foreign currencies 66
=========
(7,698)
=========
Change in net unrealized appreciation of investment securities 281,016
=========
Net gain from investment securities
and foreign currencies 273,318
=========
Net increase in net assets resulting from operations $ 265,702
=========
|
See Notes to Financial Statements.
FS-20
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 2003 and the period August 30, 2002 (Date
operations commenced) to October 31, 2002
2003 2002
----------- -----------
Operations:
Net investment income (loss) $ (7,616) $ (765)
----------- -----------
Net realized gain (loss) from investment securities
and foreign currencies (7,698) (20,338)
----------- -----------
Change in net unrealized appreciation (depreciation) of investment securities 281,016 (65,804)
=========== ===========
Net increase (decrease) in net assets resulting from operations 265,702 (86,907)
=========== ===========
Distributions to shareholders from net investment income:
Class A (4,400) --
----------- -----------
Class B (3,300) --
----------- -----------
Class C (3,300) --
=========== ===========
Decrease in net assets resulting from distributions (11,000) --
=========== ===========
Share transactions-net:
Class A 4,400 400,010
----------- -----------
Class B 3,300 300,010
----------- -----------
Class C 3,300 300,010
=========== ===========
Net increase in net assets resulting from share transactions 11,000 1,000,030
=========== ===========
Net increase in net assets 265,702 913,123
=========== ===========
Net assets:
Beginning of year 913,123 --
=========== ===========
End of year (including undistributed net investment income
(loss) of $(3,792) and $6,231 for 2--3 and 2002, respectively) 1,178,825 $ 913,123
=========== ===========
|
See Notes to Financial Statements.
FS-21
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value II 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 consists of multiple classes of shares. 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 is currently closed to new investors.
The Fund's investment objective is to provide 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
FS-22
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.
Expenses - Fees provided for under the Rule 12b-1 plan of a particular class of
the Fund and which are directly attributable to that class are charged to the
operations of such class. All other expenses are allocated among the classes
based on relative net assets.
FS-23
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 $1 billion of the Fund's average daily net assets, plus 0.70% of the Fund's next $1 billion of average daily net assets, plus 0.65% of the Fund's average daily net assets in excess of $2 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees, and increases in expenses due to expense offset arrangements, if any) for Class A, Class B and Class C shares to the extent necessary to limit the total annual fund operating expenses of Class A, Class B and Class C shares to 1.75%. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. During periods of voluntary waivers or reimbursements to the extent the annualized expense ratio does not exceed the voluntary limit for the period committed, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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. For the year ended October 31, 2003, AIM waived fees of $7,610 and reimbursed expenses of $74,541.
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 $50,000 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. During the year ended October 31, 2003, AISI retained $107 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, AIM Distributors may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own 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 amount of sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. AIM Distributors has voluntarily agreed to waive all fees during the time the shares are not available for sale. This waiver may be modified or discontinued at any time. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B and Class C shares paid $0, $0 and $0, respectively, after AIM Distributors waived plan fees of $1,420, $3,044, and $3,044, respectively.
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 $11 and reductions in custodian fees of $768 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $779.
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.
FS-24
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 $2,189 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 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 year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted 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 - DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
2003 2002
---------------------- ----------------------
Distributions paid from ordinary income $ 11,000 $ --
====================== ======================
|
Unrealized appreciation - investments $ 215,212
Temporary book/tax differences (3,792)
Capital loss carryforward (28,102)
Shares of beneficial interest 995,507
-----------------------
Total net assets $ 1,178,825
=======================
|
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 trustee deferral of compensation.
FS-25
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL
EXPIRATION LOSS CARRYFORWARD
--------------------------------- -----------------------
October 31, 2010 $ 20,338
October 31, 2011 7,764
-----------------------
Total capital loss carryforward $ 28,102
=======================
|
NOTE 7 - 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 $205,615 and $194,571, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
Aggregate unrealized appreciation of investment securities $ 235,418
--------------
Aggregate unrealized (depreciation) of investment securities (20,206)
--------------
Net unrealized appreciation of investment securities $ 215,212
==============
Investments have the same cost for tax and financial statement purposes.
|
NOTE 8 - RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions, nondeductible stock issuance costs, nondeductible excise tax paid, and net operating losses, on October 31, 2003, undistributed net investment income was increased by $8,593 undistributed net realized gains decreased by $66 and shares of beneficial interest decreased by $8,527. This reclassification had no effect on the net assets of the Fund.
NOTE 9 - SHARE INFORMATION
The Fund currently consists of three different classes of shares that are not currently available for sale: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
------------------------------------------------------------------------------------------------------
AUGUST 30, 2002 (DATE
OPERATIONS COMMENCED) TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
2003 2002
----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------ ------------ ------------------
Sold:
Class A * -- $ -- 40,001 $ 400,010
------------- ------------ ------------ ------------------
Class B * -- -- 30,001 300,010
------------- ------------ ------------ ------------------
Class C * -- -- 30,001 300,010
------------- ------------ ------------ ------------------
Issued as reinvestment of dividends:
Class A * 476 4,400 -- --
------------- ------------ ------------ ------------------
Class B * 356 3,300 -- --
------------- ------------ ------------ ------------------
Class C * 356 3,300 -- --
============ ============ ============ ==================
1,188 $ 11,000 100,003 $ 1,000,030
============ ============ ============ ==================
* Currently, the Fund is not open to investors and consequently all shares
are owned by AIM.
|
FS-26
NOTE 10-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-------------------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
-------------- ------------------
2003 2002
-------------- ------------------
Net asset value, beginning of period $ 9.13 $ 10.00
-------------- ------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.01)
-------------- ------------------
Net gains (losses) on securities (both realized and unrealized) 2.70 (0.86)
============== ==================
Total from investment operations 2.63 (0.87)
============== ==================
Less dividends from net investment income (0.11) --
============== ==================
Net asset value, end of period $ 11.65 $ 9.13
============== ==================
Total return(a) 29.12% (8.70)%
============== ==================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 472 $ 365
============== ==================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.83%(b) 1.75%(c)
-------------- ------------------
Without fee waivers and expense reimbursements 10.27%(b) 23.74%(c)
============== ==================
Ratio of net investment income (loss) to average net assets (0.75)%(b) (0.49)(c)
============== ==================
Portfolio turnover rate(d) 20% 4%
============== ==================
|
(a) 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.
(b) Ratios are based on average daily net assets of $405,837.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-27
NOTE 10-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
-------------- ----------------
2003 2002
-------------- ----------------
Net asset value, beginning of period $ 9.13 $ 10.00
-------------- ----------------
Income from investment operations:
Net investment income (loss) (0.07) (0.01)
-------------- ----------------
Net gains (losses) on securities (both realized and unrealized) 2.70 (0.86)
============== ================
Total from investment operations 2.63 (0.87)
============== ================
Less dividends from net investment income (0.11) --
============== ================
Net asset value, end of period $ 11.65 $ 9.13
============== ================
Total return (a) 29.12% (8.70)%
============== ================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 354 $ 274
============== ================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.83%(b) 1.75% (c)
-------------- ----------------
Without fee waivers and expense reimbursements 10.92%(b) 24.39% (c)
============== ================
Ratio of net investment income (loss) to average net assets (0.75)%(b) (0.49)(c)
============== ================
Portfolio turnover rate (d) 20% 4%
============== ================
|
(a) 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.
(b) Ratios are based on average daily net assets of $304,382.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-28
NOTE 10-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
-------------- ----------------
2003 2002
-------------- ----------------
Net asset value, beginning of period $ 9.13 $ 10.00
-------------- ----------------
Income from investment operations:
Net investment income (loss) (0.07) (0.01)
-------------- ----------------
Net gains (losses) on securities (both realized and unrealized) 2.70 (0.86)
============== ================
Total from investment operations 2.63 (0.87)
============== ================
Less dividends from net investment income (0.11) --
============== ================
Net asset value, end of period $ 11.65 $ 9.13
============== ================
Total return (a) 29.12% (8.70)%
============== ================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 354 $ 274
============== ================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.83%(b) 1.75% (c)
============== ================
Without fee waivers and expense reimbursements 10.92%(b) 24.39% (c)
============== ================
Ratio of net investment income (loss) to average net assets (0.75)%(b) (0.49)(c)
============== ================
Portfolio turnover rate (d) 20% 4%
============== ================
|
(a) 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.
(b) Ratios are based on average daily net assets of $304,382.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-29
NOTE 11 - SUBSEQUENT EVENT
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.
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 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-31
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-32
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-33
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-34
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-35
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-36
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-37
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-38
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-39
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-40
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-41
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-42
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-43
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-44
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-45
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-46
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-47
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-48
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-49
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-50
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-51
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-52
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-53
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-54
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-55
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-56
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-57
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-58
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-59
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-60
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-61
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-62
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-63
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-64
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-65
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-66
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-67
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-68
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-69
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-70
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-71
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-72
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-73
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-74
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-75
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-76
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-77
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-78
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-79
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-80
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-81
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-82
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-83
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-84
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-85
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-86
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-87
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-88
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-89
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-90
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-91
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-92
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-93
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-94
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-95
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Core Strategies Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Core Strategies 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, and the statements of changes in net assets and financial highlights for each of the two 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.
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 Core Strategies Fund as of October 31, 2003, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two 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-96
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
----------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.80%
AEROSPACE & DEFENSE-2.47%
General Dynamics Corp. 60 $ 5,022
----------------------------------------------------------------
Rockwell Collins, Inc. 220 6,039
----------------------------------------------------------------
United Technologies Corp. 140 11,857
================================================================
22,918
================================================================
APPAREL RETAIL-0.60%
Foot Locker, Inc. 150 2,685
----------------------------------------------------------------
Gap, Inc. (The) 150 2,862
================================================================
5,547
================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.88%
Carter's, Inc.(a) 200 5,600
----------------------------------------------------------------
Liz Claiborne, Inc. 70 2,582
================================================================
8,182
================================================================
APPLICATION SOFTWARE-0.45%
Amdocs Ltd. (United Kingdom)(a) 120 2,575
----------------------------------------------------------------
Reynolds & Reynolds Co. (The)-Class A 60 1,630
================================================================
4,205
================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.29%
National Financial Partners Corp.(a) 100 2,710
================================================================
AUTO PARTS & EQUIPMENT-1.39%
Autoliv, Inc. 180 5,962
----------------------------------------------------------------
Lear Corp.(a) 30 1,743
----------------------------------------------------------------
LKQ Corp.(a) 300 5,190
================================================================
12,895
================================================================
BIOTECHNOLOGY-1.60%
Amgen Inc.(a) 150 9,264
----------------------------------------------------------------
Gilead Sciences, Inc.(a) 20 1,092
----------------------------------------------------------------
Invitrogen Corp.(a) 70 4,451
================================================================
14,807
================================================================
BUILDING PRODUCTS-0.83%
Masco Corp. 280 7,700
================================================================
CASINOS & GAMING-0.29%
GTECH Holdings Corp. 60 2,681
================================================================
COMMUNICATIONS EQUIPMENT-2.49%
Cisco Systems, Inc.(a) 940 19,721
----------------------------------------------------------------
QLogic Corp.(a) 60 3,363
================================================================
23,084
================================================================
|
----------------------------------------------------------------
MARKET
SHARES VALUE
COMPUTER & ELECTRONICS RETAIL-0.82%
Best Buy Co., Inc. 100 $ 5,831
----------------------------------------------------------------
RadioShack Corp. 60 1,799
================================================================
7,630
================================================================
COMPUTER HARDWARE-3.77%
Dell Inc.(a) 640 23,117
----------------------------------------------------------------
Hewlett-Packard Co. 290 6,470
----------------------------------------------------------------
International Business Machines Corp. 60 5,369
================================================================
34,956
================================================================
CONSUMER FINANCE-3.82%
American Express Co. 300 14,079
----------------------------------------------------------------
Capital One Financial Corp. 110 6,688
----------------------------------------------------------------
First Marblehead Corp. (The)(a) 200 4,430
----------------------------------------------------------------
MBNA Corp. 410 10,147
================================================================
35,344
================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.50%
Alliance Data Systems Corp.(a) 60 1,667
----------------------------------------------------------------
Ceridian Corp.(a) 130 2,730
----------------------------------------------------------------
First Data Corp. 180 6,426
----------------------------------------------------------------
SunGard Data Systems Inc.(a) 110 3,085
================================================================
13,908
================================================================
DEPARTMENT STORES-0.36%
Federated Department Stores, Inc. 70 3,328
================================================================
DIVERSIFIED BANKS-5.61%
Bank of America Corp. 210 15,903
----------------------------------------------------------------
Bank One Corp. 50 2,122
----------------------------------------------------------------
U.S. Bancorp 460 12,521
----------------------------------------------------------------
Wachovia Corp. 270 12,385
----------------------------------------------------------------
Wells Fargo & Co. 160 9,011
================================================================
51,942
================================================================
DIVERSIFIED CAPITAL MARKETS-0.78%
J.P. Morgan Chase & Co. 200 7,180
================================================================
DIVERSIFIED CHEMICALS-0.68%
Engelhard Corp. 220 6,288
================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.31%
Apollo Group, Inc.-Class A(a) 50 3,176
----------------------------------------------------------------
Cendant Corp.(a) 300 6,129
----------------------------------------------------------------
Deluxe Corp. 110 4,441
----------------------------------------------------------------
Equifax Inc. 200 4,888
----------------------------------------------------------------
University of Phoenix Online(a) 40 2,750
================================================================
21,384
================================================================
|
FS-97
MARKET
SHARES VALUE
----------------------------------------------------------------
ELECTRIC UTILITIES-0.88%
Entergy Corp. 50 $ 2,695
----------------------------------------------------------------
Exelon Corp. 60 3,807
----------------------------------------------------------------
Southern Co. (The) 55 1,639
================================================================
8,141
================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.82%
Amphenol Corp.-Class A(a) 40 2,350
----------------------------------------------------------------
Thermo Electron Corp.(a) 240 5,275
================================================================
7,625
================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.43%
Monsanto Co. 160 4,008
================================================================
FOOD DISTRIBUTORS-0.47%
Sysco Corp. 130 4,376
================================================================
FOOD RETAIL-1.18%
Kroger Co. (The)(a) 280 4,897
----------------------------------------------------------------
SUPERVALU INC 240 6,053
================================================================
10,950
================================================================
FOOTWEAR-1.05%
NIKE, Inc.-Class B 110 7,029
----------------------------------------------------------------
Reebok International Ltd. 70 2,726
================================================================
9,755
================================================================
GENERAL MERCHANDISE STORES-0.78%
Dollar General Corp. 180 4,045
----------------------------------------------------------------
Target Corp. 80 3,179
================================================================
7,224
================================================================
HEALTH CARE DISTRIBUTORS-0.19%
Cardinal Health, Inc. 30 1,780
================================================================
HEALTH CARE EQUIPMENT-1.45%
Apogent Technologies Inc.(a) 210 4,609
----------------------------------------------------------------
Becton, Dickinson & Co. 110 4,022
----------------------------------------------------------------
Guidant Corp. 30 1,530
----------------------------------------------------------------
Stryker Corp. 40 3,244
================================================================
13,405
================================================================
HEALTH CARE SERVICES-0.23%
IMS Health Inc. 90 2,118
================================================================
HEALTH CARE SUPPLIES-0.56%
Bausch & Lomb Inc. 50 2,408
----------------------------------------------------------------
Fisher Scientific International Inc.(a) 70 2,817
================================================================
5,225
================================================================
HOME ENTERTAINMENT SOFTWARE-0.21%
Electronic Arts Inc.(a) 20 1,981
================================================================
|
----------------------------------------------------------------
MARKET
SHARES VALUE
HOME IMPROVEMENT RETAIL-2.06%
Home Depot, Inc. (The) 340 $ 12,604
----------------------------------------------------------------
Lowe's Cos., Inc. 110 6,482
================================================================
19,086
================================================================
HOMEBUILDING-0.54%
M.D.C. Holdings, Inc. 30 2,020
----------------------------------------------------------------
Toll Brothers, Inc.(a) 80 2,947
================================================================
4,967
================================================================
HOUSEHOLD PRODUCTS-2.72%
Clorox Co. (The) 120 5,436
----------------------------------------------------------------
Colgate-Palmolive Co. 150 7,978
----------------------------------------------------------------
Procter & Gamble Co. (The) 120 11,795
================================================================
25,209
================================================================
HYPERMARKETS & SUPER CENTERS-2.55%
Wal-Mart Stores, Inc. 400 23,580
================================================================
INDUSTRIAL CONGLOMERATES-3.73%
3M Co. 50 3,943
----------------------------------------------------------------
General Electric Co. 960 27,850
----------------------------------------------------------------
Tyco International Ltd. (Bermuda) 130 2,714
================================================================
34,507
================================================================
INDUSTRIAL MACHINERY-0.86%
Donaldson Co., Inc. 40 2,289
----------------------------------------------------------------
Graco Inc. 150 5,715
================================================================
8,004
================================================================
INSURANCE BROKERS-0.14%
Marsh & McLennan Cos., Inc. 30 1,282
================================================================
INTEGRATED OIL & GAS-3.05%
Exxon Mobil Corp. 650 23,777
----------------------------------------------------------------
Royal Dutch Petroleum Co.-New York Shares
(Netherlands) 100 4,438
================================================================
28,215
================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.28%
BellSouth Corp. 245 6,446
----------------------------------------------------------------
SBC Communications Inc. 330 7,913
----------------------------------------------------------------
Verizon Communications Inc. 200 6,720
================================================================
21,079
================================================================
INTERNET RETAIL-0.18%
eBay Inc. 30 1,678
================================================================
INTERNET SOFTWARE & SERVICES-0.28%
Yahoo! Inc.(a) 60 2,622
================================================================
INVESTMENT BANKING & BROKERAGE-2.62%
Bear Stearns Cos. Inc. (The) 40 3,050
----------------------------------------------------------------
Lehman Brothers Holdings Inc. 40 2,880
----------------------------------------------------------------
Merrill Lynch & Co., Inc. 170 10,064
----------------------------------------------------------------
|
FS-98
MARKET
SHARES VALUE
----------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-(CONTINUED)
Morgan Stanley 150 $ 8,231
================================================================
24,225
================================================================
IT CONSULTING & OTHER SERVICES-0.50%
DigitalNet Holdings, Inc.(a) 200 4,622
================================================================
LIFE & HEALTH INSURANCE-0.42%
Prudential Financial, Inc. 100 3,864
================================================================
MANAGED HEALTH CARE-2.23%
Anthem, Inc.(a) 120 8,212
----------------------------------------------------------------
UnitedHealth Group Inc. 140 7,123
----------------------------------------------------------------
WellPoint Health Networks Inc.(a) 60 5,334
================================================================
20,669
================================================================
MOTORCYCLE MANUFACTURERS-0.56%
Harley-Davidson, Inc. 110 5,215
================================================================
MOVIES & ENTERTAINMENT-0.78%
Viacom Inc.-Class B 180 7,177
================================================================
MULTI-LINE INSURANCE-1.05%
American International Group, Inc. 160 9,733
================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.12%
Citigroup Inc. 610 28,914
================================================================
PERSONAL PRODUCTS-0.73%
Avon Products, Inc. 100 6,796
================================================================
PHARMACEUTICALS-7.92%
Abbott Laboratories 300 12,786
----------------------------------------------------------------
Bristol-Myers Squibb Co. 70 1,776
----------------------------------------------------------------
Johnson & Johnson 480 24,158
----------------------------------------------------------------
King Pharmaceuticals, Inc.(a) 120 1,608
----------------------------------------------------------------
Merck & Co. Inc. 200 8,850
----------------------------------------------------------------
Pfizer Inc. 640 20,224
----------------------------------------------------------------
Wyeth 90 3,973
================================================================
73,375
================================================================
PROPERTY & CASUALTY INSURANCE-0.40%
Progressive Corp. (The) 50 3,690
================================================================
REGIONAL BANKS-1.33%
National City Corp. 280 9,145
----------------------------------------------------------------
PNC Financial Services Group 60 3,214
================================================================
12,359
================================================================
RESTAURANTS-1.38%
CBRL Group, Inc. 50 1,938
----------------------------------------------------------------
McDonald's Corp. 160 4,002
----------------------------------------------------------------
|
----------------------------------------------------------------
MARKET
SHARES VALUE
RESTAURANTS-(CONTINUED)
Yum! Brands, Inc.(a) 200 $ 6,828
================================================================
12,768
================================================================
SEMICONDUCTORS-4.28%
AMIS Holdings, Inc.(a) 200 4,030
----------------------------------------------------------------
Intel Corp. 910 30,076
----------------------------------------------------------------
Linear Technology Corp. 130 5,539
================================================================
39,645
================================================================
SOFT DRINKS-2.30%
Coca-Cola Co. (The) 160 7,424
----------------------------------------------------------------
PepsiCo, Inc. 290 13,868
================================================================
21,292
================================================================
SPECIALTY CHEMICALS-0.19%
Cytec Industries Inc.(a) 50 1,746
================================================================
SPECIALTY STORES-1.19%
AutoNation, Inc.(a) 330 6,171
----------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 70 2,957
----------------------------------------------------------------
Staples, Inc.(a) 70 1,877
================================================================
11,005
================================================================
SYSTEMS SOFTWARE-5.14%
Adobe Systems Inc. 100 4,384
----------------------------------------------------------------
Microsoft Corp. 1,060 27,719
----------------------------------------------------------------
Oracle Corp.(a) 750 8,970
----------------------------------------------------------------
VERITAS Software Corp.(a) 180 6,507
================================================================
47,580
================================================================
THRIFTS & MORTGAGE FINANCE-2.79%
Countrywide Financial Corp. 50 5,256
----------------------------------------------------------------
Fannie Mae 95 6,811
----------------------------------------------------------------
IndyMac Bancorp, Inc. 80 2,352
----------------------------------------------------------------
Washington Mutual, Inc. 260 11,375
================================================================
25,794
================================================================
TOBACCO-1.00%
Altria Group, Inc. 200 9,300
================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.29%
AT&T Wireless Services Inc.(a) 370 2,683
================================================================
Total Common Stocks & Other Equity
Interests (Cost $862,413) 905,958
================================================================
TOTAL INVESTMENTS-97.80% (Cost $862,413) 905,958
================================================================
OTHER ASSETS LESS LIABILITIES-2.20% 20,405
================================================================
NET ASSETS-100.00% $926,363
________________________________________________________________
================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security. See Notes to Financial Statements.
FS-99
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost $862,413) $905,958
----------------------------------------------------------
Cash 27,500
----------------------------------------------------------
Receivables for:
Dividends 1,208
----------------------------------------------------------
Amount due from advisor 14,249
----------------------------------------------------------
Investment for deferred compensation plan 5,332
==========================================================
Total assets 954,247
__________________________________________________________
==========================================================
LIABILITIES:
Payables for:
Investments purchased 3,200
----------------------------------------------------------
Deferred compensation plan 5,332
----------------------------------------------------------
Accrued trustees' fees 569
----------------------------------------------------------
Accrued transfer agent fees 10
----------------------------------------------------------
Accrued operating expenses 18,773
==========================================================
Total liabilities 27,884
==========================================================
Net assets applicable to shares outstanding $926,363
__________________________________________________________
==========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $998,865
----------------------------------------------------------
Undistributed net investment income (loss) (4,522)
----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (111,525)
----------------------------------------------------------
Unrealized appreciation of investment securities
and option contracts 43,545
==========================================================
$926,363
__________________________________________________________
==========================================================
NET ASSETS:
Class A $370,543
__________________________________________________________
==========================================================
Class B $277,910
__________________________________________________________
==========================================================
Class C $277,910
__________________________________________________________
==========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 40,723
__________________________________________________________
==========================================================
Class B 30,542
__________________________________________________________
==========================================================
Class C 30,542
__________________________________________________________
==========================================================
Class A:
Net asset value per share $ 9.10
----------------------------------------------------------
Offering price per share:
(Net asset value of $9.10 divided by 94.50%) $ 9.63
__________________________________________________________
==========================================================
Class B:
Net asset value and offering price per share $ 9.10
__________________________________________________________
==========================================================
Class C:
Net asset value and offering price per share $ 9.10
__________________________________________________________
==========================================================
|
See Notes to Financial Statements.
FS-100
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $17) $ 12,197
======================================================================
EXPENSES:
Advisory fees 6,219
----------------------------------------------------------------------
Administrative services fees 50,000
----------------------------------------------------------------------
Custodian fees 4,661
----------------------------------------------------------------------
Distribution fees:
Class A 1,160
----------------------------------------------------------------------
Class B 2,488
----------------------------------------------------------------------
Class C 2,488
----------------------------------------------------------------------
Transfer agent fees 112
----------------------------------------------------------------------
Trustees' fees 8,659
----------------------------------------------------------------------
Professional fees 23,951
----------------------------------------------------------------------
Other 2,466
======================================================================
Total expenses 102,204
======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (87,700)
======================================================================
Net expenses 14,504
======================================================================
Net investment income (loss) (2,307)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (12,501)
----------------------------------------------------------------------
Option contracts written 1,450
======================================================================
(11,051)
======================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 140,573
----------------------------------------------------------------------
Option contracts written (78)
======================================================================
140,495
======================================================================
Net gain from investment securities and option contracts 129,444
======================================================================
Net increase in net assets resulting from operations $127,137
______________________________________________________________________
======================================================================
|
See Notes to Financial Statements.
FS-101
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 2003 and the period December 31, 2001 (date operations commenced) to October 31, 2002
2003 2002
------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,307) $ (3,380)
------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (11,051) (100,474)
------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts 140,495 (96,950)
====================================================================================
Net increase (decrease) in net assets resulting from
operations 127,137 (200,804)
====================================================================================
Distributions to shareholders from net investment income:
Class A (5,600) --
------------------------------------------------------------------------------------
Class B (4,200) --
------------------------------------------------------------------------------------
Class C (4,200) --
====================================================================================
Decrease in net assets resulting from distributions (14,000) --
====================================================================================
Share transactions-net:
Class A 5,600 400,010
------------------------------------------------------------------------------------
Class B 4,200 300,010
------------------------------------------------------------------------------------
Class C 4,200 300,010
====================================================================================
Net increase in net assets resulting from share
transactions 14,000 1,000,030
====================================================================================
Net increase in net assets 127,137 799,226
====================================================================================
NET ASSETS:
Beginning of year 799,226 --
====================================================================================
End of year (including undistributed net investment income
(loss) of $(4,522) and $11,693 for 2003 and 2002,
respectively) $926,363 $ 799,226
____________________________________________________________________________________
====================================================================================
|
See Notes to Financial Statements.
FS-102
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Core Strategies 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 consists of multiple classes of shares. 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 is currently closed to new investors.
The Fund's investment objective is to provide 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 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").
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.
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. 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.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to
FS-103
that class are charged to the operations of such class. 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 $1 billion of the Fund's average daily net assets, plus 0.70% of the Fund's next $1 billion of average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $2 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expense offset arrangements, if any) for Class A, Class B and Class C shares to the extent necessary to limit the total annual fund operating expenses of Class A shares to 1.75%. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. 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. For the year ended October 31, 2003, AIM waived fees of $6,219 and reimbursed fees of $75,063.
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 $50,000 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. During the year ended October 31, 2003, AISI retained $63 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, AIM Distributors may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own 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 amount of sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. AIM Distributors has voluntarily agreed to waive all fees during the time the shares are not available for sale. Waivers may be modified or discontinued at any time. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B and Class C shares paid $0, $0 and $0, respectively after AIM Distributors waived fees of $1,160, $2,488 and $2,488, respectively.
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 $9 and reductions in custodian fees of $273 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $282.
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 $2,189 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 year ended October 31, 2003, the Fund did not borrow or lend under the
interfund lending facility or borrow under the uncommitted unsecured revolving
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.
FS-104
NOTE 6--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
---------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------------------------------------------------------
Beginning of year 10 $ 405
---------------------------------------------------------
Written 34 1,638
---------------------------------------------------------
Closed (12) (574)
---------------------------------------------------------
Exercised (4) (246)
---------------------------------------------------------
Expired (28) (1,223)
---------------------------------------------------------
End of year -- $ --
_________________________________________________________
=========================================================
|
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
The tax character of distributions paid during the year ended October 31, 2003 and the period December 31, 2001 (date operations commenced) through October 31, 2002 was as follows:
2003 2002
-----------------------------------------------------------
Distributions paid from ordinary income $14,000 --
___________________________________________________________
===========================================================
|
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 $ 1,317 ---------------------------------------------------------- Unrealized appreciation -- investments 43,545 ---------------------------------------------------------- Temporary book/tax differences (5,839) ---------------------------------------------------------- Capital loss carryforward (111,525) ---------------------------------------------------------- Shares of beneficial interest 998,865 ========================================================== Total net assets $ 926,363 __________________________________________________________ ========================================================== |
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.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
October 31, 2010 $100,474
----------------------------------------------------------
October 31, 2011 11,051
==========================================================
Total capital loss carryforward $111,525
__________________________________________________________
==========================================================
|
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 $651,530 and $651,758, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------
Aggregate unrealized appreciation of investment
securities $ 92,822
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (49,277)
==========================================================
Net unrealized appreciation of investment
securities $ 43,545
__________________________________________________________
==========================================================
Investments have the same cost for tax and financial
statement purposes.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of stock issuance costs and nondeductible excise tax paid by the fund, on October 31, 2003, undistributed net investment income was increased by $92 and shares of beneficial interest decreased by $92. This reclassification had no effect on the net assets of the Fund.
FS-105
NOTE 10--SHARE INFORMATION
The Fund currently consists of three different classes of shares that are not currently available for sale: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
--------------------------------------------------------------------------------------------------------
DECEMBER 31, 2001
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, 2003 OCTOBER 31, 2002
----------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
Sold:
Class A* -- $ -- 40,001 $ 400,010
--------------------------------------------------------------------------------------------------------
Class B* -- -- 30,001 300,010
--------------------------------------------------------------------------------------------------------
Class C* -- -- 30,001 300,010
========================================================================================================
Issued as reinvestment of dividends:
Class A* 722 5,600 -- --
--------------------------------------------------------------------------------------------------------
Class B* 541 4,200 -- --
--------------------------------------------------------------------------------------------------------
Class C* 541 4,200 -- --
========================================================================================================
1,804 $14,000 100,003 $1,000,030
________________________________________________________________________________________________________
========================================================================================================
|
* Currently, the Fund is not open to investors and consequently all shares are owned by AIM.
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A
------------------------------------------
DECEMBER 31, 2001 (DATE
YEAR ENDED OPERATIONS COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.99 $ 10.00
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.03)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.27 (1.98)
========================================================================================================
Total from investment operations 1.25 (2.01)
========================================================================================================
Less dividends from net investment income (0.14) --
========================================================================================================
Net asset value, end of period $ 9.10 $ 7.99
________________________________________________________________________________________________________
========================================================================================================
Total return(a) 15.95% (20.10)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 371 $ 320
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.82%(c)
--------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 11.94%(b) 13.71%(c)
========================================================================================================
Ratio of net investment income (loss) to average net assets (0.28)%(b) (0.45)%(c)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(d) 81% 42%
________________________________________________________________________________________________________
========================================================================================================
|
(a) 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.
(b) Ratios are based on average daily net assets of $331,666.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-106
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------
DECEMBER 31, 2001 (DATE
YEAR ENDED OPERATIONS COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.99 $ 10.00
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.03)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.27 (1.98)
========================================================================================================
Total from investment operations 1.25 (2.01)
========================================================================================================
Less dividends from net investment income (0.14) --
========================================================================================================
Net asset value, end of period $ 9.10 $ 7.99
________________________________________________________________________________________________________
========================================================================================================
Total return(a) 15.95% (20.10)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 278 $ 240
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.82%(c)
--------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 12.59%(b) 14.36%(c)
========================================================================================================
Ratio of net investment income (loss) to average net assets (0.28)%(b) (0.45)%(c)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(d) 81% 42%
________________________________________________________________________________________________________
========================================================================================================
|
(a) 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.
(b) Ratios are based on average daily net assets of $248,752.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-107
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------
DECEMBER 31, 2001 (DATE
YEAR ENDED OPERATIONS COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.99 $ 10.00
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.03)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.27 (1.98)
========================================================================================================
Total from investment operations 1.25 (2.01)
========================================================================================================
Less dividends from net investment income (0.14) --
========================================================================================================
Net asset value, end of period $ 9.10 $ 7.99
________________________________________________________________________________________________________
========================================================================================================
Total return(a) 15.95% (20.10)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 278 $ 240
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.82%(c)
--------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 12.59%(b) 14.36%(c)
========================================================================================================
Ratio of net investment income (loss) to average net assets (0.28)%(b) (0.45)%(c)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(d) 81% 42%
________________________________________________________________________________________________________
========================================================================================================
|
(a) 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.
(b) Ratios are based on average daily net assets of $248,752.
(c) Annualized.
(d) Not annualized for periods less than one year.
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--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.
FS-108
NOTE 12--SUBSEQUENT EVENTS (CONTINUED)
AIM has received inquiries from the SEC, NASD, Inc., 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.
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-109
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Dent Demographics Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Dent Demographics 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 Dent Demographics 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-110
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-94.61%
APPAREL RETAIL-2.05%
AnnTaylor Stores Corp.(a) 105,000 $ 3,759,000
------------------------------------------------------------------------
Gap, Inc. (The) 260,000 4,960,800
------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 120,000 2,770,800
========================================================================
11,490,600
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.95%
Coach, Inc.(a) 150,000 5,320,500
========================================================================
APPLICATION SOFTWARE-1.38%
Mercury Interactive Corp.(a) 100,000 4,644,000
------------------------------------------------------------------------
PeopleSoft, Inc.(a) 150,000 3,114,000
========================================================================
7,758,000
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.31%
Franklin Resources, Inc. 92,000 4,362,640
------------------------------------------------------------------------
T. Rowe Price Group Inc. 73,000 3,003,950
========================================================================
7,366,590
========================================================================
BIOTECHNOLOGY-3.48%
Amgen Inc.(a) 140,000 8,646,400
------------------------------------------------------------------------
Genentech, Inc.(a) 52,300 4,287,031
------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 21,400 1,168,012
------------------------------------------------------------------------
Invitrogen Corp.(a) 85,000 5,405,150
========================================================================
19,506,593
========================================================================
CASINOS & GAMING-0.82%
International Game Technology 140,000 4,585,000
========================================================================
COMMUNICATIONS EQUIPMENT-8.23%
ADTRAN, Inc. 60,000 4,081,800
------------------------------------------------------------------------
Cisco Systems, Inc.(a) 600,000 12,588,000
------------------------------------------------------------------------
Comverse Technology, Inc.(a) 220,000 3,968,800
------------------------------------------------------------------------
Corning Inc.(a) 400,000 4,392,000
------------------------------------------------------------------------
Juniper Networks, Inc.(a) 250,000 4,497,500
------------------------------------------------------------------------
Motorola, Inc. 345,000 4,667,850
------------------------------------------------------------------------
Nortel Networks Corp. (Canada)(a) 850,000 3,782,500
------------------------------------------------------------------------
QLogic Corp.(a) 75,000 4,203,750
------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 90,000 3,970,800
========================================================================
46,153,000
========================================================================
COMPUTER & ELECTRONICS RETAIL-1.35%
Best Buy Co., Inc. 130,000 7,580,300
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
COMPUTER HARDWARE-1.48%
Dell Inc.(a) 230,000 $ 8,307,600
========================================================================
COMPUTER STORAGE & PERIPHERALS-3.17%
EMC Corp.(a) 580,000 8,027,200
------------------------------------------------------------------------
Network Appliance, Inc.(a) 125,000 3,085,000
------------------------------------------------------------------------
SanDisk Corp.(a) 40,000 3,224,000
------------------------------------------------------------------------
Seagate Technology (Cayman Islands) 150,000 3,447,000
========================================================================
17,783,200
========================================================================
CONSUMER FINANCE-1.96%
American Express Co. 115,000 5,396,950
------------------------------------------------------------------------
MBNA Corp. 225,000 5,568,750
========================================================================
10,965,700
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.07%
Affiliated Computer Services, Inc.-Class A(a) 60,000 2,935,800
------------------------------------------------------------------------
Alliance Data Systems Corp.(a) 150,000 4,167,000
------------------------------------------------------------------------
Paychex, Inc. 115,000 4,475,800
========================================================================
11,578,600
========================================================================
DEPARTMENT STORES-0.76%
Nordstrom, Inc. 140,000 4,268,600
========================================================================
DIVERSIFIED BANKS-1.27%
Wachovia Corp. 155,000 7,109,850
========================================================================
DIVERSIFIED CAPITAL MARKETS-1.41%
J.P. Morgan Chase & Co. 220,000 7,898,000
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.77%
Career Education Corp.(a) 80,000 4,284,000
========================================================================
DRUG RETAIL-0.50%
CVS Corp. 80,000 2,814,400
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.79%
Agilent Technologies, Inc.(a) 177,500 4,423,300
========================================================================
GENERAL MERCHANDISE STORES-0.60%
Target Corp. 85,000 3,377,900
========================================================================
HEALTH CARE DISTRIBUTORS-0.65%
Omnicare, Inc. 95,000 3,642,300
========================================================================
HEALTH CARE EQUIPMENT-3.80%
Boston Scientific Corp.(a) 130,000 8,803,600
------------------------------------------------------------------------
Guidant Corp. 85,000 4,335,850
------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 56,000 3,580,640
------------------------------------------------------------------------
|
FS-111
MARKET
SHARES VALUE
------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-(CONTINUED)
Zimmer Holdings, Inc.(a) 72,000 $ 4,594,320
========================================================================
21,314,410
========================================================================
HEALTH CARE SERVICES-1.52%
Caremark Rx, Inc.(a) 200,000 5,010,000
------------------------------------------------------------------------
DaVita, Inc.(a) 100,000 3,510,000
========================================================================
8,520,000
========================================================================
HEALTH CARE SUPPLIES-1.09%
Alcon, Inc. (Switzerland) 60,000 3,306,600
------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 70,000 2,817,500
========================================================================
6,124,100
========================================================================
HOME ENTERTAINMENT SOFTWARE-1.40%
Electronic Arts Inc.(a) 45,000 4,456,800
------------------------------------------------------------------------
Take-Two Interactive Software, Inc.(a) 85,000 3,361,750
========================================================================
7,818,550
========================================================================
HOME IMPROVEMENT RETAIL-1.13%
Home Depot, Inc. (The) 170,000 6,301,900
========================================================================
HOTELS, RESORTS & CRUISE LINES-1.46%
Royal Caribbean Cruises Ltd. (Liberia) 100,000 2,971,000
------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 155,000 5,228,150
========================================================================
8,199,150
========================================================================
HOUSEHOLD PRODUCTS-1.05%
Procter & Gamble Co. (The) 60,000 5,897,400
========================================================================
INTERNET RETAIL-2.79%
Amazon.com, Inc.(a) 185,000 10,067,700
------------------------------------------------------------------------
eBay Inc.(a) 100,000 5,594,000
========================================================================
15,661,700
========================================================================
INTERNET SOFTWARE & SERVICES-1.48%
Yahoo! Inc.(a) 190,000 8,303,000
========================================================================
INVESTMENT BANKING & BROKERAGE-3.84%
Charles Schwab Corp. (The) 385,000 5,220,600
------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 95,000 8,920,500
------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 125,000 7,400,000
========================================================================
21,541,100
========================================================================
IT CONSULTING & OTHER SERVICES-0.79%
Accenture Ltd.-Class A (Bermuda)(a) 190,000 4,446,000
========================================================================
MANAGED HEALTH CARE-2.33%
Aetna Inc. 50,000 2,870,500
------------------------------------------------------------------------
Coventry Health Care, Inc.(a) 56,000 3,066,000
------------------------------------------------------------------------
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
MANAGED HEALTH CARE-(CONTINUED)
PacifiCare Health Systems, Inc.(a) 53,500 $ 3,183,250
------------------------------------------------------------------------
UnitedHealth Group Inc. 77,000 3,917,760
========================================================================
13,037,510
========================================================================
MOTORCYCLE MANUFACTURERS-0.51%
Harley-Davidson, Inc. 60,000 2,844,600
========================================================================
MOVIES & ENTERTAINMENT-1.08%
Viacom Inc.-Class B 152,000 6,060,240
========================================================================
MULTI-LINE INSURANCE-1.49%
Hartford Financial Services Group, Inc. (The) 75,000 4,117,500
------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 145,000 4,225,300
========================================================================
8,342,800
========================================================================
OFFICE ELECTRONICS-0.57%
Zebra Technologies Corp.-Class A(a) 56,000 3,189,200
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.86%
Citigroup Inc. 220,000 10,428,000
========================================================================
PHARMACEUTICALS-5.28%
Lilly (Eli) & Co. 55,000 3,664,100
------------------------------------------------------------------------
Pfizer Inc. 135,000 4,266,000
------------------------------------------------------------------------
Pharmaceutical Resources, Inc.(a) 60,000 4,336,800
------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 71,000 4,561,750
------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 115,000 6,542,350
------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 29,500 1,158,465
------------------------------------------------------------------------
Wyeth 115,000 5,076,100
========================================================================
29,605,565
========================================================================
PUBLISHING-0.92%
Getty Images, Inc.(a) 115,000 5,140,500
========================================================================
RESTAURANTS-0.56%
Starbucks Corp.(a) 100,000 3,160,000
========================================================================
SEMICONDUCTOR EQUIPMENT-2.98%
Entegris Inc.(a) 250,000 3,290,000
------------------------------------------------------------------------
Novellus Systems, Inc.(a) 325,000 13,419,250
========================================================================
16,709,250
========================================================================
SEMICONDUCTORS-8.57%
Analog Devices, Inc.(a) 250,000 11,082,500
------------------------------------------------------------------------
Linear Technology Corp. 100,000 4,261,000
------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 100,000 4,387,000
------------------------------------------------------------------------
Microchip Technology Inc. 300,000 9,813,000
------------------------------------------------------------------------
PMC-Sierra, Inc.(a) 200,000 3,634,000
------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan) 600,000 6,636,000
------------------------------------------------------------------------
Texas Instruments Inc. 285,000 8,242,200
========================================================================
48,055,700
========================================================================
|
FS-112
MARKET
SHARES VALUE
------------------------------------------------------------------------
SPECIALTY STORES-3.52%
Advance Auto Parts, Inc.(a) 56,000 $ 4,380,320
------------------------------------------------------------------------
Staples, Inc.(a) 160,000 4,291,200
------------------------------------------------------------------------
Tiffany & Co. 125,000 5,931,250
------------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 145,000 5,122,850
========================================================================
19,725,620
========================================================================
SYSTEMS SOFTWARE-7.03%
Computer Associates International, Inc. 300,000 7,056,000
------------------------------------------------------------------------
Microsoft Corp. 520,000 13,598,000
------------------------------------------------------------------------
Oracle Corp.(a) 335,000 4,006,600
------------------------------------------------------------------------
Symantec Corp.(a) 71,000 4,732,150
------------------------------------------------------------------------
VERITAS Software Corp.(a) 277,500 10,031,625
========================================================================
39,424,375
========================================================================
TECHNOLOGY DISTRIBUTORS-0.75%
CDW Corp. 70,000 4,203,500
========================================================================
THRIFTS & MORTGAGE FINANCE-1.81%
Doral Financial Corp. (Puerto Rico) 90,000 4,545,000
------------------------------------------------------------------------
New York Community Bancorp, Inc. 155,000 5,611,000
========================================================================
10,156,000
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $412,171,027) 530,424,203
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
MONEY MARKET FUNDS-5.06%
STIC Liquid Assets Portfolio(b) 14,188,517 $ 14,188,517
------------------------------------------------------------------------
STIC Prime Portfolio(b) 14,188,517 14,188,517
========================================================================
Total Money Market Funds (Cost
$28,377,034) 28,377,034
========================================================================
TOTAL INVESTMENTS-99.67% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $440,548,061) 558,801,237
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-2.46%
STIC Liquid Assets Portfolio(b)(c) 13,760,300 13,760,300
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $13,760,300) 13,760,300
========================================================================
TOTAL INVESTMENTS-102.13% (Cost $454,308,361) 572,561,537
========================================================================
OTHER ASSETS LESS LIABILITIES-(2.13%) (11,928,896)
========================================================================
NET ASSETS-100.00% $560,632,641
________________________________________________________________________
========================================================================
|
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-113
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$412,171,027)* $ 530,424,203
------------------------------------------------------------
Investments in affiliated money market funds
(cost $42,137,334) 42,137,334
------------------------------------------------------------
Receivables for:
Investments sold 19,168,632
------------------------------------------------------------
Fund shares sold 285,653
------------------------------------------------------------
Dividends 298,613
------------------------------------------------------------
Investment for deferred compensation plan 29,558
------------------------------------------------------------
Other assets 21,033
============================================================
Total assets 592,365,026
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 15,932,154
------------------------------------------------------------
Fund shares reacquired 960,889
------------------------------------------------------------
Deferred compensation plan 29,558
------------------------------------------------------------
Collateral upon return of securities
loaned 13,760,300
------------------------------------------------------------
Amount due custodian bank 22,182
------------------------------------------------------------
Accrued distribution fees 352,160
------------------------------------------------------------
Accrued trustees' fees 18,790
------------------------------------------------------------
Accrued transfer agent fees 419,406
------------------------------------------------------------
Accrued operating expenses 236,946
============================================================
Total liabilities 31,732,385
============================================================
Net assets applicable to shares outstanding $ 560,632,641
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,332,848,413
------------------------------------------------------------
Undistributed net investment income (loss) (47,845)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (890,421,103)
------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 118,253,176
============================================================
$ 560,632,641
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 212,862,734
____________________________________________________________
============================================================
Class B $ 251,650,060
____________________________________________________________
============================================================
Class C $ 96,119,847
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 27,345,132
____________________________________________________________
============================================================
Class B 33,275,069
____________________________________________________________
============================================================
Class C 12,711,437
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 7.78
------------------------------------------------------------
Offering price per share:
(Net asset value of $7.78 divided by
94.50%) $ 8.23
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 7.56
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 7.56
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $13,346,326
were on loan to brokers.
See Notes to Financial Statements.
FS-114
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $43,299) $ 3,368,071
--------------------------------------------------------------------------
Dividends from affiliated money market funds 203,943
--------------------------------------------------------------------------
Interest 12,466
--------------------------------------------------------------------------
Securities lending 15,476
==========================================================================
Total investment income 3,599,956
==========================================================================
EXPENSES:
Advisory fees 4,249,017
--------------------------------------------------------------------------
Administrative services fees 132,438
--------------------------------------------------------------------------
Custodian fees 77,399
--------------------------------------------------------------------------
Distribution fees:
Class A 660,338
--------------------------------------------------------------------------
Class B 2,241,790
--------------------------------------------------------------------------
Class C 870,372
--------------------------------------------------------------------------
Transfer agent fees 3,452,061
--------------------------------------------------------------------------
Trustees' fees 17,458
--------------------------------------------------------------------------
Other 432,312
==========================================================================
Total expenses 12,133,185
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (73,913)
==========================================================================
Net expenses 12,059,272
==========================================================================
Net investment income (loss) (8,459,316)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 13,284,983
--------------------------------------------------------------------------
Foreign currencies (896)
--------------------------------------------------------------------------
Option contracts written (384,883)
==========================================================================
12,899,204
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 124,404,259
--------------------------------------------------------------------------
Foreign currencies 18,842
--------------------------------------------------------------------------
Option contracts written (8,273)
==========================================================================
124,414,828
==========================================================================
Net gain from investment securities, foreign currencies and
option contracts 137,314,032
==========================================================================
Net increase in net assets resulting from operations $128,854,716
__________________________________________________________________________
==========================================================================
|
See Notes to Financial Statements.
FS-115
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
-------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (8,459,316) $ (12,825,259)
-------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures contracts and option
contracts 12,899,204 (202,713,132)
-------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and option contracts 124,414,828 63,144,429
===========================================================================================
Net increase (decrease) in net assets resulting from
operations 128,854,716 (152,393,962)
===========================================================================================
Share transactions-net:
Class A (26,713,489) (64,886,914)
-------------------------------------------------------------------------------------------
Class B (29,364,137) (75,460,458)
-------------------------------------------------------------------------------------------
Class C (14,000,141) (35,199,684)
===========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (70,077,767) (175,547,056)
===========================================================================================
Net increase (decrease) in net assets 58,776,949 (327,941,018)
===========================================================================================
NET ASSETS:
Beginning of year 501,855,692 829,796,710
===========================================================================================
End of year (including undistributed net investment income
(loss) of $(47,845) and $(36,813) for 2003 and 2002,
respectively) $560,632,641 $ 501,855,692
___________________________________________________________________________________________
===========================================================================================
|
See Notes to Financial Statements.
FS-116
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Dent Demographic Trends 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 fund 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-117
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 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 and which are directly attributable to that class are charged to the operations of such class. 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"). H.S. Dent Advisors, Inc. ("H.S. Dent") is the Fund's sub-advisor. Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $2 billion of the Fund's average daily net assets, plus 0.80% of the Fund's average daily net assets exceeding $2 billion. Under the terms of a sub-advisory agreement between AIM and H.S. Dent, AIM pays H.S. Dent at the annual rate of 0.13% of the first $1 billion of the Fund's average daily net assets, plus 0.10% of the next $1 billion of the Fund's average daily net assets, plus 0.07% of the Fund's average daily net assets exceeding $2 billion. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses of Class A, Class B and Class C shares to the extent necessary to limit total annual operating expenses of Class A shares to 2.00%. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. 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). For the year ended October 31, 2003, AIM waived fees of $3,998. Under a prior agreement to limit the
FS-118
aggregate costs of certain shareholder services provided by third party administrators, AIM reimbursed fees of $58,910 for Class A, Class B and Class C shares based on the relative net assets of those classes.
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 $132,438 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. During the year ended October 31, 2003, AISI retained $1,925,638 for such services.
The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C 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 or Class C 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 and Class C shares paid $660,338, $2,241,790 and $870,372, 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 $76,461 in front-end sales commissions from the sale of Class A shares and $0, $38 and $4,191 from Class A, Class B and Class C 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 $11,005 under an expense offset arrangement which resulted in a reduction of the Fund's total expenses of $11,005.
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 $3,042 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.
FS-119
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 $13,346,326 were on loan to brokers. The loans were secured by cash collateral of $13,760,300 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 $15,476 for securities lending.
NOTE 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
------------------------------------------------------------
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
Beginning of year 275 $ 69,460
------------------------------------------------------------
Written 18,016 2,584,777
------------------------------------------------------------
Closed (17,851) (2,604,959)
------------------------------------------------------------
Expired (440) (49,278)
============================================================
End of year -- $ --
____________________________________________________________
============================================================
|
NOTE 8--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 $ 115,181,534 ------------------------------------------------------------ Temporary book/tax differences (47,845) ------------------------------------------------------------ Capital loss carryforward (887,349,461) ------------------------------------------------------------ Shares of beneficial interest 1,332,848,413 ============================================================ Total net assets $ 560,632,641 ____________________________________________________________ ============================================================ |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) 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 (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales and the tax deferral for tax purposes on certain straddle transactions.
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 $ 3,389,675
----------------------------------------------------------
October 31, 2008 144,576,334
----------------------------------------------------------
October 31, 2009 541,794,870
----------------------------------------------------------
October 31, 2010 195,681,695
----------------------------------------------------------
October 31, 2011 1,906,887
==========================================================
Total capital loss carryforward $887,349,461
__________________________________________________________
==========================================================
|
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 $735,016,461 and $824,749,316, respectively.
UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $118,030,322
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (2,848,788)
===========================================================
Net unrealized appreciation of investment
securities $115,181,534
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $457,380,003.
|
NOTE 10--RECLASSIFICATION 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
(loss) was increased by $8,448,284, undistributed net realized gains increased
by $895 and shares of beneficial interest decreased by $8,449,179. This
reclassification had no effect on net assets of the Fund.
FS-120
NOTE 11--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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 3,976,331 $ 26,689,358 5,537,858 $ 43,117,200
-------------------------------------------------------------------------------------------------------------------------
Class B 3,032,772 19,799,210 3,503,829 26,984,220
-------------------------------------------------------------------------------------------------------------------------
Class C 1,236,736 8,126,066 1,824,515 14,029,736
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 268,267 1,801,536 214,960 1,628,659
-------------------------------------------------------------------------------------------------------------------------
Class B (275,388) (1,801,536) (217,773) (1,628,659)
=========================================================================================================================
Reacquired:
Class A (8,611,375) (55,204,383) (15,019,465) (109,632,773)
-------------------------------------------------------------------------------------------------------------------------
Class B (7,607,073) (47,361,811) (14,137,854) (100,816,019)
-------------------------------------------------------------------------------------------------------------------------
Class C (3,515,974) (22,126,207) (6,815,024) (49,229,420)
=========================================================================================================================
(11,495,704) $(70,077,767) (25,108,954) $(175,547,056)
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------
JUNE 7, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------------------ OCTOBER 31,
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.00 $ 7.62 $ 15.40 $ 12.14 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09) (0.12) (0.12) (0.11) (0.03)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.87 (1.50) (7.66) 3.37 2.17
=================================================================================================================================
Total from investment operations 1.78 (1.62) (7.78) 3.26 2.14
=================================================================================================================================
Net asset value, end of period $ 7.78 $ 6.00 $ 7.62 $ 15.40 $ 12.14
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 29.67% (21.26)% (50.52)% 26.85% 21.40%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $212,863 $190,253 $312,377 $666,929 $163,872
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.01%(b)(c) 1.87% 1.64% 1.50% 1.60%(b)(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.29)%(c) (1.31)% (1.04)% (0.93)% (1.00)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 152% 189% 143% 90% 29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
()(a)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.
()(b)After fee waivers and reimbursements. Ratio of expenses to average net
assets prior to the fee waivers for 2003 and 1999 was 2.02% and 1.65%
(annualized), respectively.
()(c)Ratios are based on average daily net assets of $188,668,082.
()(d)Annualized.
()(e)Not annualized for periods less than one year.
FS-121
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------------------
JUNE 7, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------------------ OCTOBER 31,
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.87 $ 7.50 $ 15.26 $ 12.11 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.17) (0.18) (0.18) (0.04)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.82 (1.46) (7.58) 3.33 2.15
=================================================================================================================================
Total from investment operations 1.69 (1.63) (7.76) 3.15 2.11
=================================================================================================================================
Net asset value, end of period $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 28.79% (21.73)% (50.85)% 26.01% 21.10%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $251,650 $223,666 $367,494 $748,480 $177,430
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.66%(b)(c) 2.53% 2.32% 2.17% 2.24%(b)(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.94)%(c) (1.97)% (1.72)% (1.60)% (1.64)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 152% 189% 143% 90% 29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
()(a)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.
()(b)After fee waivers and reimbursements. Ratio of expenses to average net
assets prior to the fee waivers for 2003 and 1999 was 2.67% and 2.29%
(annualized), respectively.
()(c)Ratios are based on average daily net assets of $224,179,024.
()(d)Annualized.
()(e)Not annualized for periods less than one year.
CLASS C
----------------------------------------------------------------------
JUNE 7, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------------------ OCTOBER 31,
2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.87 $ 7.50 $ 15.26 $ 12.11 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.17) (0.19) (0.17) (0.04)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.82 (1.46) (7.57) 3.32 2.15
=================================================================================================================================
Total from investment operations 1.69 (1.63) (7.76) 3.15 2.11
=================================================================================================================================
Net asset value, end of period $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 28.79% (21.73)% (50.85)% 26.01% 21.10%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $96,120 $87,938 $149,925 $309,821 $51,605
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.66%(b)(c) 2.53% 2.32% 2.17% 2.24%(b)(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.94)%(c) (1.97)% (1.72)% (1.60)% (1.64)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 152% 189% 143% 90% 29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
()(a)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.
()(b)After fee waivers and reimbursements. Ratio of expenses to average net
assets prior to the fee waivers for 2003 and 1999 was 2.67% and 2.29%
(annualized), respectively.
()(c)Ratios are based on average daily net assets of $87,037,243.
()(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.
FS-122
NOTE 13--SUBSEQUENT EVENTS (CONTINUED)
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-123
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Diversified Dividend Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Diversified Dividend 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, and the statements of changes in net assets and financial highlights for each of the two 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.
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 Diversified Dividend Fund as of October 31, 2003, the results of its operations for the year then ended, and the statements of changes in its net assets and financial highlights for each of the two 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-124
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-92.35%
ADVERTISING-1.44%
Omnicom Group Inc. 9,000 $ 718,200
=======================================================================
AEROSPACE & DEFENSE-1.31%
United Technologies Corp. 7,700 652,113
=======================================================================
APPAREL RETAIL-1.28%
Limited Brands 36,300 638,880
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.60%
V. F. Corp. 18,800 798,060
=======================================================================
APPLICATION SOFTWARE-0.54%
SAP A.G.-ADR (Germany) 7,300 266,742
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.46%
Federated Investors, Inc.-Class B 8,300 229,495
=======================================================================
AUTO PARTS & EQUIPMENT-0.65%
Johnson Controls, Inc. 3,000 322,590
=======================================================================
BREWERS-0.48%
Anheuser-Busch Cos., Inc. 4,900 241,374
=======================================================================
BUILDING PRODUCTS-1.31%
Masco Corp. 23,700 651,750
=======================================================================
COMMUNICATIONS EQUIPMENT-0.60%
Motorola, Inc. 22,100 299,013
=======================================================================
COMPUTER HARDWARE-1.80%
Diebold, Inc. 11,200 639,072
-----------------------------------------------------------------------
International Business Machines Corp. 2,900 259,492
=======================================================================
898,564
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.55%
Deere & Co. 4,500 272,790
=======================================================================
CONSTRUCTION MATERIALS-1.45%
Lafarge North America Inc. 10,400 375,440
-----------------------------------------------------------------------
Vulcan Materials Co. 7,800 345,618
=======================================================================
721,058
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.87%
Automatic Data Processing, Inc. 14,700 554,778
-----------------------------------------------------------------------
First Data Corp. 10,500 374,850
=======================================================================
929,628
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
DISTRIBUTORS-0.90%
Genuine Parts Co. 14,100 $ 448,662
=======================================================================
DIVERSIFIED BANKS-5.20%
Bank of America Corp. 4,400 333,212
-----------------------------------------------------------------------
Comerica Inc. 7,800 401,544
-----------------------------------------------------------------------
FleetBoston Financial Corp. 17,800 718,942
-----------------------------------------------------------------------
U.S. Bancorp 19,100 519,902
-----------------------------------------------------------------------
Wachovia Corp. 13,400 614,658
=======================================================================
2,588,258
=======================================================================
DIVERSIFIED CHEMICALS-1.96%
Dow Chemical Co. (The) 10,000 376,900
-----------------------------------------------------------------------
PPG Industries, Inc. 10,400 599,560
=======================================================================
976,460
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.37%
H&R Block, Inc. 12,300 579,207
-----------------------------------------------------------------------
Viad Corp. 24,000 599,520
=======================================================================
1,178,727
=======================================================================
ELECTRIC UTILITIES-4.93%
Entergy Corp. 6,800 366,520
-----------------------------------------------------------------------
Exelon Corp. 5,500 348,975
-----------------------------------------------------------------------
FirstEnergy Corp. 13,000 447,070
-----------------------------------------------------------------------
Pinnacle West Capital Corp. 10,000 365,600
-----------------------------------------------------------------------
Public Service Enterprise Group Inc. 8,700 355,569
-----------------------------------------------------------------------
Wisconsin Energy Corp. 17,400 569,850
=======================================================================
2,453,584
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.00%
Cooper Industries, Ltd.-Class A (Bermuda) 5,700 301,530
-----------------------------------------------------------------------
Emerson Electric Co. 12,200 692,350
=======================================================================
993,880
=======================================================================
FOOTWEAR-0.94%
NIKE, Inc.-Class B 7,300 466,470
=======================================================================
HEALTH CARE EQUIPMENT-2.08%
Bard (C.R.), Inc. 7,500 600,375
-----------------------------------------------------------------------
Becton, Dickinson & Co. 11,900 435,064
=======================================================================
1,035,439
=======================================================================
HEALTH CARE SERVICES-0.90%
IMS Health Inc. 19,000 447,070
=======================================================================
HOME IMPROVEMENT RETAIL-0.88%
Home Depot, Inc. (The) 11,800 437,426
=======================================================================
|
FS-125
MARKET
SHARES VALUE
-----------------------------------------------------------------------
HOTELS, RESORTS & CRUISE LINES-1.01%
Carnival Corp. (Panama) 14,400 $ 502,704
=======================================================================
HOUSEHOLD APPLIANCES-0.85%
Snap-on Inc. 14,400 422,496
=======================================================================
HOUSEHOLD PRODUCTS-1.12%
Kimberly-Clark Corp. 6,300 332,703
-----------------------------------------------------------------------
Procter & Gamble Co. (The) 2,300 226,067
=======================================================================
558,770
=======================================================================
INDUSTRIAL MACHINERY-4.90%
Dover Corp. 15,900 620,418
-----------------------------------------------------------------------
Eaton Corp. 7,500 751,800
-----------------------------------------------------------------------
Illinois Tool Works Inc. 6,300 463,365
-----------------------------------------------------------------------
Pentair, Inc. 14,800 606,800
=======================================================================
2,442,383
=======================================================================
INTEGRATED OIL & GAS-6.44%
BP PLC-ADR (United Kingdom) 6,200 262,756
-----------------------------------------------------------------------
ChevronTexaco Corp. 4,000 297,200
-----------------------------------------------------------------------
ConocoPhillips 11,200 640,080
-----------------------------------------------------------------------
Eni S.p.A. (Italy) 25,500 403,523
-----------------------------------------------------------------------
Exxon Mobil Corp. 20,700 757,206
-----------------------------------------------------------------------
Occidental Petroleum Corp. 16,500 581,790
-----------------------------------------------------------------------
Total S.A. (France) 1,700 263,304
=======================================================================
3,205,859
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.28%
SBC Communications Inc. 26,500 635,470
=======================================================================
INVESTMENT BANKING & BROKERAGE-2.55%
Lehman Brothers Holdings Inc. 5,800 417,600
-----------------------------------------------------------------------
Merrill Lynch & Co., Inc. 4,700 278,240
-----------------------------------------------------------------------
Morgan Stanley 10,500 576,135
=======================================================================
1,271,975
=======================================================================
LIFE & HEALTH INSURANCE-1.03%
Prudential Financial, Inc. 13,300 513,912
=======================================================================
MULTI-LINE INSURANCE-0.69%
Hartford Financial Services Group, Inc. (The) 6,300 345,870
=======================================================================
OFFICE SERVICES & SUPPLIES-1.40%
Pitney Bowes, Inc. 17,000 698,700
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.82%
Citigroup Inc. 13,400 635,160
-----------------------------------------------------------------------
Principal Financial Group, Inc. 8,700 272,745
=======================================================================
907,905
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PACKAGED FOODS & MEATS-3.04%
General Mills, Inc. 6,300 $ 282,555
-----------------------------------------------------------------------
Kellogg Co. 19,100 632,783
-----------------------------------------------------------------------
Sara Lee Corp. 30,100 599,893
=======================================================================
1,515,231
=======================================================================
PAPER PACKAGING-1.23%
Sonoco Products Co. 28,700 610,449
=======================================================================
PAPER PRODUCTS-0.80%
MeadWestvaco Corp. 15,300 396,576
=======================================================================
PERSONAL PRODUCTS-0.91%
Avon Products, Inc. 6,700 455,332
=======================================================================
PHARMACEUTICALS-8.75%
Abbott Laboratories 14,400 613,728
-----------------------------------------------------------------------
Bristol-Myers Squibb Co. 37,300 946,301
-----------------------------------------------------------------------
Johnson & Johnson 12,400 624,092
-----------------------------------------------------------------------
Lilly (Eli) & Co. 8,800 586,256
-----------------------------------------------------------------------
Merck & Co. Inc. 13,500 597,375
-----------------------------------------------------------------------
Pfizer Inc. 23,200 733,120
-----------------------------------------------------------------------
Wyeth 5,800 256,012
=======================================================================
4,356,884
=======================================================================
PROPERTY & CASUALTY INSURANCE-4.11%
ACE Ltd. (Cayman Islands) 13,300 478,800
-----------------------------------------------------------------------
Chubb Corp. (The) 5,700 380,817
-----------------------------------------------------------------------
MBIA Inc. 7,200 429,192
-----------------------------------------------------------------------
SAFECO Corp. 13,500 495,450
-----------------------------------------------------------------------
St. Paul Cos., Inc. (The) 6,900 263,097
=======================================================================
2,047,356
=======================================================================
PUBLISHING-1.14%
McGraw-Hill Cos., Inc. (The) 8,500 569,075
=======================================================================
REAL ESTATE-0.75%
Developers Diversified Realty Corp. 13,000 375,700
=======================================================================
REGIONAL BANKS-1.64%
Cullen/Frost Bankers, Inc. 12,900 500,004
-----------------------------------------------------------------------
KeyCorp 11,300 319,225
=======================================================================
819,229
=======================================================================
RESTAURANTS-1.31%
Outback Steakhouse, Inc. 15,500 651,000
=======================================================================
SEMICONDUCTORS-1.09%
Intel Corp. 16,400 542,020
=======================================================================
|
FS-126
MARKET
SHARES VALUE
-----------------------------------------------------------------------
SOFT DRINKS-1.72%
Coca-Cola Co. (The) 5,900 $ 273,760
-----------------------------------------------------------------------
PepsiCo, Inc. 12,200 583,404
=======================================================================
857,164
=======================================================================
SYSTEMS SOFTWARE-1.25%
Microsoft Corp. 23,800 622,370
=======================================================================
THRIFTS & MORTGAGE FINANCE-2.49%
Fannie Mae 11,100 795,759
-----------------------------------------------------------------------
MGIC Investment Corp. 8,700 446,397
=======================================================================
1,242,156
=======================================================================
TOBACCO-1.53%
Altria Group, Inc. 16,400 762,600
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $41,095,808) 45,995,419
=======================================================================
PRINCIPAL
AMOUNT
BONDS & NOTES-2.00%
AEROSPACE & DEFENSE-0.17%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06 $ 75,000 86,305
=======================================================================
BROADCASTING & CABLE TV-0.22%
TCI Communications, Inc., Medium Term Notes,
8.35%, 02/15/05 100,000 107,152
=======================================================================
CONSUMER FINANCE-0.22%
Household Finance Corp., Sr. Unsec. Global
Notes, 8.00%, 05/09/05 100,000 109,067
=======================================================================
ELECTRIC UTILITIES-0.35%
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05 160,000 175,547
=======================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES-0.33%
Deutsche Telekom International Finance B.V.
(Netherlands), Unsec. Gtd. Unsub. Global
Bonds,
8.25%, 06/15/05 $ 50,000 $ 54,676
-----------------------------------------------------------------------
SBC Communications Capital Corp.-Series D,
Medium Term Notes, 7.11%, 08/14/06 100,000 111,751
=======================================================================
166,427
=======================================================================
INVESTMENT BANKING & BROKERAGE-0.23%
Bear Stearns Cos. Inc. (The), Sr. Unsec.
Notes, 7.00%, 03/01/07 100,000 111,848
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.28%
Anadarko Petroleum Corp. (Canada), Unsec.
Yankee Deb., 7.38%, 05/15/06 125,000 139,348
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.20%
General Electric Capital Corp.-Series A,
Medium Term Global Notes, 2.85%, 01/30/06 100,000 101,057
=======================================================================
Total Bonds & Notes (Cost $990,190) 996,751
=======================================================================
SHARES
MONEY MARKET FUNDS-6.49%
STIC Liquid Assets Portfolio(a) 1,615,482 1,615,482
-----------------------------------------------------------------------
STIC Prime Portfolio(a) 1,615,482 1,615,482
=======================================================================
Total Money Market Funds (Cost
$3,230,964) 3,230,964
=======================================================================
TOTAL INVESTMENTS-100.84% (Cost $45,316,962) 50,223,134
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.84%) (418,309)
=======================================================================
NET ASSETS-100.00% $49,804,825
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Deb. - Debentures Gtd. - Guaranteed Sr. - Senior Unsec. - Unsecured Unsub. - Unsubordinated |
Notes to Schedule of Investments:
(a) The money market fund and the Fund are affiliated by having the same investment advisor.
See Notes to Financial Statements.
FS-127
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$42,085,998) $46,992,170
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $3,230,964) 3,230,964
-----------------------------------------------------------
Receivables for:
Investments sold 32,920
-----------------------------------------------------------
Fund shares sold 403,841
-----------------------------------------------------------
Dividends and interest 82,361
-----------------------------------------------------------
Amount due from advisor 25,338
-----------------------------------------------------------
Investment for deferred compensation plan 5,385
-----------------------------------------------------------
Other assets 27,154
===========================================================
Total assets 50,800,133
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 869,331
-----------------------------------------------------------
Fund shares reacquired 36,189
-----------------------------------------------------------
Deferred compensation plan 5,385
-----------------------------------------------------------
Accrued distribution fees 28,296
-----------------------------------------------------------
Accrued trustees' fees 591
-----------------------------------------------------------
Accrued transfer agent fees 14,335
-----------------------------------------------------------
Accrued operating expenses 41,181
===========================================================
Total liabilities 995,308
===========================================================
Net assets applicable to shares outstanding $49,804,825
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $45,572,412
-----------------------------------------------------------
Undistributed net investment income (loss) (3,386)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (670,387)
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 4,906,186
===========================================================
$49,804,825
___________________________________________________________
===========================================================
NET ASSETS:
Class A $22,374,504
___________________________________________________________
===========================================================
Class B $21,582,034
___________________________________________________________
===========================================================
Class C $ 5,848,287
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 2,180,187
___________________________________________________________
===========================================================
Class B 2,121,810
___________________________________________________________
===========================================================
Class C 575,748
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.26
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.26 divided by
94.50%) $ 10.86
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.17
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.16
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-128
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $3,963) $ 571,931
------------------------------------------------------------------------
Dividends from affiliated money market funds 30,052
------------------------------------------------------------------------
Interest 20,050
========================================================================
Total investment income 622,033
========================================================================
EXPENSES:
Advisory fees 215,768
------------------------------------------------------------------------
Administrative services fees 50,000
------------------------------------------------------------------------
Custodian fees 20,888
------------------------------------------------------------------------
Distribution fees:
Class A 45,341
------------------------------------------------------------------------
Class B 128,716
------------------------------------------------------------------------
Class C 29,430
------------------------------------------------------------------------
Transfer agent fees 98,940
------------------------------------------------------------------------
Trustees' fees 8,802
------------------------------------------------------------------------
Registration and filing fees 46,087
------------------------------------------------------------------------
Other 68,290
========================================================================
Total expenses 712,262
========================================================================
Less: Fees waived and expense offset arrangements (175,536)
========================================================================
Net expenses 536,726
========================================================================
Net investment income 85,307
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (471,997)
------------------------------------------------------------------------
Foreign currencies 694
------------------------------------------------------------------------
Option contracts written 7,791
========================================================================
(463,512)
========================================================================
Change in net unrealized appreciation of:
Investment securities 6,127,064
------------------------------------------------------------------------
Foreign currencies 14
========================================================================
6,127,078
========================================================================
Net gain from investment securities, foreign currencies and
option contracts 5,663,566
========================================================================
Net increase in net assets resulting from operations $5,748,873
________________________________________________________________________
========================================================================
|
See Notes to Financial Statements.
FS-129
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 2003 and the period December 31, 2001 (date operations commenced) through October 31, 2002
2003 2002
----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 85,307 $ (40,975)
----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (463,512) (206,181)
----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, and foreign currencies 6,127,078 (1,220,892)
========================================================================================
Net increase (decrease) in net assets resulting from
operations 5,748,873 (1,468,048)
========================================================================================
Distributions to shareholders from net investment income:
Class A (67,755) --
----------------------------------------------------------------------------------------
Class B (14,134) --
----------------------------------------------------------------------------------------
Class C (3,436) --
========================================================================================
Decrease in net assets resulting from distributions (85,325) --
========================================================================================
Share transactions-net:
Class A 11,899,583 8,520,795
----------------------------------------------------------------------------------------
Class B 12,028,596 7,728,359
----------------------------------------------------------------------------------------
Class C 4,163,744 1,268,248
========================================================================================
Net increase in net assets resulting from share
transactions 28,091,923 17,517,402
========================================================================================
Net increase in net assets 33,755,471 16,049,354
========================================================================================
NET ASSETS:
Beginning of year 16,049,354 --
========================================================================================
End of year (including undistributed net investment income
(loss) of $(3,386) and $(2,049) for 2003 and 2002,
respectively) $49,804,825 $16,049,354
________________________________________________________________________________________
========================================================================================
|
See Notes to Financial Statements.
FS-130
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Diversified Dividend Fund (the "Fund"), formerly AIM Large Cap Core Equity 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 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. 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 are declared and paid quarterly and are recorded on ex-dividend date. Distributions from 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
FS-131
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. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. 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 $1 billion of the Fund's average daily net assets, plus 0.70% of the Fund's next $1 billion of average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $2 billion. AIM has contractually agreed to waive fees and/or reimburse expenses for Class A, Class B and Class C shares to the extent necessary to limit the total fund operating expenses of Class A to 1.50%. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expense offset arrangements, if any) for Class A, Class B and Class C shares to the extent necessary to limit the total fund operating expenses to 1.00%, 1.65% and 1.65%, respectively. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. 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. For the year ended October 31, 2003, AIM waived fees of $175,090.
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 $50,000 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. During the year ended October 31, 2003, AISI retained $55,029 for such services.
The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C 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 or Class C 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,
FS-132
Class B and Class C shares paid $45,341, $128,716 and $29,430, 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 $36,213 in front-end sales commissions from the sale of Class A shares and $1, $0 and $592 from Class A, Class B and Class C 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 $436 and reductions in custodian fees of $10 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $446.
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 $2,202 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--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
----------------------------------------------------------
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------------------------------------------------
Beginning of year -- $ --
----------------------------------------------------------
Written 152 16,170
----------------------------------------------------------
Closed (122) (11,235)
----------------------------------------------------------
Exercised (30) (4,935)
==========================================================
End of year -- $ --
__________________________________________________________
==========================================================
|
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
The tax character of distributions paid during the year ended October 31, 2003 and the period December 31, 2002 (date operations commenced) through October 31, 2002 was as follows:
2003 2002
------------------------------------------------------------
Distributions paid from ordinary income $85,325 $ --
____________________________________________________________
============================================================
|
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 $ 2,512 ----------------------------------------------------------- Unrealized appreciation -- investments 4,647,216 ----------------------------------------------------------- Temporary book/tax differences (5,898) ----------------------------------------------------------- Capital loss carryforward (411,417) ----------------------------------------------------------- Shares of beneficial interest 45,572,412 =========================================================== Total net assets $49,804,825 ___________________________________________________________ =========================================================== |
FS-133
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 tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $14.
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.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
October 31, 2010 $154,832
----------------------------------------------------------
October 31, 2011 256,585
==========================================================
Total capital loss carryforward $411,417
__________________________________________________________
==========================================================
|
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 $47,211,158 and $19,032,484, respectively.
UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of investment
securities $4,991,861
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (344,659)
===========================================================
Net unrealized appreciation of investment
securities $4,647,202
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $45,575,932.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of stock issuance costs and foreign currencies transactions on October 31, 2003, undistributed net investment income (loss) was decreased by $1,319 undistributed net realized gains (losses) decreased by $694 and shares of beneficial interest increased by $2,013. This reclassification had no effect on the net assets of the Fund.
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2001
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,036,155 $18,695,942 1,167,599 $10,833,949
------------------------------------------------------------------------------------------------------------------
Class B 1,811,612 16,607,284 976,016 9,080,411
------------------------------------------------------------------------------------------------------------------
Class C 599,285 5,518,092 158,298 1,525,564
==================================================================================================================
Issued as reinvestment of dividends:
Class A 6,293 61,880 -- --
------------------------------------------------------------------------------------------------------------------
Class B 1,275 12,449 -- --
------------------------------------------------------------------------------------------------------------------
Class C 324 3,166 -- --
==================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 71,889 675,552 2,855 25,596
------------------------------------------------------------------------------------------------------------------
Class B (72,485) (675,552) (2,981) (25,596)
==================================================================================================================
Reacquired:
Class A (834,757) (7,533,791) (269,847) (2,338,750)
------------------------------------------------------------------------------------------------------------------
Class B (439,212) (3,915,585) (152,415) (1,326,456)
------------------------------------------------------------------------------------------------------------------
Class C (152,851) (1,357,514) (29,308) (257,316)
==================================================================================================================
3,027,528 $28,091,923 1,850,217 $17,517,402
__________________________________________________________________________________________________________________
==================================================================================================================
|
FS-134
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------
DECEMBER 31, 2001
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.70 $ 10.00
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) (0.03)(a)
-------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.54 (1.27)
=================================================================================================
Total from investment operations 1.60 (1.30)
=================================================================================================
Less dividends from net investment income (0.04) --
=================================================================================================
Net asset value, end of period $ 10.26 $ 8.70
_________________________________________________________________________________________________
=================================================================================================
Total return(b) 18.39% (13.00)%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $22,375 $ 7,834
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.51%(c) 1.75%(d)
-------------------------------------------------------------------------------------------------
Without fee waivers 2.12%(c) 4.26%(d)
=================================================================================================
Ratio of net investment income (loss) to average net assets 0.65%(c) (0.34)%(d)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(e) 72% 42%
_________________________________________________________________________________________________
=================================================================================================
|
(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 $12,954,421.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-135
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------
DECEMBER 31, 2001
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.65 $ 10.00
------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00(a) (0.08)(a)
------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.53 (1.27)
================================================================================================
Total from investment operations 1.53 (1.35)
================================================================================================
Less dividends from net investment income (0.01) --
================================================================================================
Net asset value, end of period $ 10.17 $ 8.65
________________________________________________________________________________________________
================================================================================================
Total return(b) 17.67% (13.50)%
________________________________________________________________________________________________
================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $21,582 $ 7,100
________________________________________________________________________________________________
================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.16%(c) 2.40%(d)
------------------------------------------------------------------------------------------------
Without fee waivers 2.77%(c) 4.91%(d)
================================================================================================
Ratio of net investment income (loss) to average net assets 0.00%(c) (0.99)%(d)
________________________________________________________________________________________________
================================================================================================
Portfolio turnover rate(e) 72% 42%
________________________________________________________________________________________________
================================================================================================
|
(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 $12,871,589.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS C
-----------------------------------
DECEMBER 31, 2001
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.65 $ 10.00
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00(a) (0.08)(a)
-------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.52 (1.27)
=================================================================================================
Total from investment operations 1.52 (1.35)
=================================================================================================
Less dividends from net investment income (0.01) --
=================================================================================================
Net asset value, end of period $10.16 $ 8.65
_________________________________________________________________________________________________
=================================================================================================
Total return(b) 17.55% (13.50)%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,848 $ 1,116
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.16%(c) 2.40%(d)
-------------------------------------------------------------------------------------------------
Without fee waivers 2.77%(c) 4.91%(d)
=================================================================================================
Ratio of net investment income (loss) to average net assets 0.00%(c) (0.99)%(d)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(e) 72% 42%
_________________________________________________________________________________________________
=================================================================================================
|
(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 $2,943,032.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-136
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-137
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Emerging Growth Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Emerging 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 Emerging 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-138
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-91.12%
ADVERTISING-2.55%
Lamar Advertising Co.(a) 100,000 $ 3,030,000
-----------------------------------------------------------------------
Omnicom Group Inc. 10,000 798,000
=======================================================================
3,828,000
=======================================================================
AEROSPACE & DEFENSE-0.47%
L-3 Communications Holdings, Inc.(a) 15,000 701,100
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.28%
V. F. Corp. 10,000 424,500
=======================================================================
APPLICATION SOFTWARE-1.63%
Citrix Systems, Inc.(a) 40,000 1,011,200
-----------------------------------------------------------------------
Magma Design Automation, Inc.(a) 20,000 484,600
-----------------------------------------------------------------------
Synopsys, Inc.(a) 30,000 951,600
=======================================================================
2,447,400
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.65%
Investors Financial Services Corp. 40,000 1,413,200
-----------------------------------------------------------------------
Janus Capital Group Inc. 75,000 1,060,500
=======================================================================
2,473,700
=======================================================================
BIOTECHNOLOGY-2.97%
Amgen Inc.(a) 12,000 741,120
-----------------------------------------------------------------------
Angiotech Pharmaceuticals, Inc. (Canada)(a) 20,000 914,600
-----------------------------------------------------------------------
Gilead Sciences, Inc.(a) 15,000 818,700
-----------------------------------------------------------------------
ICOS Corp.(a) 9,000 420,480
-----------------------------------------------------------------------
Myogen, Inc.(a) 42,700 683,200
-----------------------------------------------------------------------
Serologicals Corp.(a) 55,000 880,000
=======================================================================
4,458,100
=======================================================================
BROADCASTING & CABLE TV-4.79%
Clear Channel Communications, Inc. 45,000 1,836,900
-----------------------------------------------------------------------
Cox Radio, Inc.-Class A(a) 25,000 553,000
-----------------------------------------------------------------------
Entravision Communications Corp.-Class A(a) 95,000 909,150
-----------------------------------------------------------------------
Radio One, Inc.-Class D(a) 30,000 477,000
-----------------------------------------------------------------------
TiVo Inc.(a) 75,000 601,500
-----------------------------------------------------------------------
Univision Communications Inc.-Class A(a) 30,000 1,018,500
-----------------------------------------------------------------------
Westwood One, Inc.(a) 60,000 1,795,800
=======================================================================
7,191,850
=======================================================================
COMMUNICATIONS EQUIPMENT-3.97%
Enterasys Networks, Inc.(a) 125,000 487,500
-----------------------------------------------------------------------
|
-----------------------------------------------------------------------
MARKET
SHARES VALUE
COMMUNICATIONS EQUIPMENT-(CONTINUED)
McDATA Corp.-Class A(a) 50,000 $ 516,500
-----------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 125,000 2,123,750
-----------------------------------------------------------------------
UTStarcom, Inc.(a) 90,000 2,835,000
=======================================================================
5,962,750
=======================================================================
COMPUTER STORAGE & PERIPHERALS-1.70%
Applied Films Corp.(a) 30,000 940,500
-----------------------------------------------------------------------
Dot Hill Systems Corp.(a) 35,000 469,350
-----------------------------------------------------------------------
Seagate Technology (Cayman Islands) 50,000 1,149,000
=======================================================================
2,558,850
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.80%
AGCO Corp.(a) 150,000 2,700,000
=======================================================================
CONSUMER FINANCE-1.74%
First Marblehead Corp. (The)(a) 40,000 886,000
-----------------------------------------------------------------------
MBNA Corp. 70,000 1,732,500
=======================================================================
2,618,500
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.60%
DST Systems, Inc.(a) 40,000 1,512,800
-----------------------------------------------------------------------
First Data Corp. 40,000 1,428,000
-----------------------------------------------------------------------
Fiserv, Inc.(a) 70,000 2,472,400
=======================================================================
5,413,200
=======================================================================
DEPARTMENT STORES-0.93%
Kohl's Corp.(a) 25,000 1,401,750
=======================================================================
DIVERSIFIED CHEMICALS-0.64%
Olin Corp. 55,000 957,550
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.44%
ARAMARK Corp.-Class B(a) 25,000 668,000
-----------------------------------------------------------------------
ChoicePoint Inc.(a) 20,000 700,800
-----------------------------------------------------------------------
Exult Inc.(a) 100,000 793,000
=======================================================================
2,161,800
=======================================================================
DRUG RETAIL-0.46%
Walgreen Co. 20,000 696,400
=======================================================================
ENVIRONMENTAL SERVICES-0.81%
Waste Connections, Inc.(a) 35,000 1,213,800
=======================================================================
HEALTH CARE DISTRIBUTORS-0.68%
AmerisourceBergen Corp. 10,000 567,700
-----------------------------------------------------------------------
|
FS-139
MARKET
SHARES VALUE
-----------------------------------------------------------------------
HEALTH CARE DISTRIBUTORS-(CONTINUED)
McKesson Corp. 15,000 $ 454,050
=======================================================================
1,021,750
=======================================================================
HEALTH CARE EQUIPMENT-0.55%
STERIS Corp.(a) 40,000 832,800
=======================================================================
HEALTH CARE FACILITIES-0.26%
Triad Hospitals, Inc.(a) 12,500 384,125
=======================================================================
HEALTH CARE SERVICES-2.22%
Caremark Rx, Inc.(a) 100,000 2,505,000
-----------------------------------------------------------------------
Express Scripts, Inc.(a) 15,000 823,800
=======================================================================
3,328,800
=======================================================================
HEALTH CARE SUPPLIES-0.60%
Regeneration Technologies, Inc.(a) 75,000 900,000
=======================================================================
HOTELS, RESORTS & CRUISE LINES-0.50%
Intrawest Corp. (Canada) 45,000 756,450
=======================================================================
HOUSEHOLD APPLIANCES-0.69%
Black & Decker Corp. (The) 10,000 478,100
-----------------------------------------------------------------------
Maytag Corp. 22,000 558,800
=======================================================================
1,036,900
=======================================================================
HOUSEHOLD PRODUCTS-1.06%
Colgate-Palmolive Co. 20,000 1,063,800
-----------------------------------------------------------------------
Kimberly-Clark Corp. 10,000 528,100
=======================================================================
1,591,900
=======================================================================
HOUSEWARES & SPECIALTIES-1.14%
Newell Rubbermaid Inc.(a) 75,000 1,710,000
=======================================================================
INDUSTRIAL GASES-0.45%
Airgas, Inc. 35,000 670,250
=======================================================================
INDUSTRIAL MACHINERY-0.96%
SPX Corp.(a) 30,000 1,443,600
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.75%
Telefonos de Mexico S.A. de C.V.-Series L-ADR
(Mexico) 40,000 1,286,000
-----------------------------------------------------------------------
Verizon Communications Inc. 40,000 1,344,000
=======================================================================
2,630,000
=======================================================================
INTERNET RETAIL-1.22%
InterActiveCorp.(a) 50,000 1,835,500
=======================================================================
INVESTMENT BANKING & BROKERAGE-2.05%
Bear Stearns Cos. Inc. (The) 10,000 762,500
-----------------------------------------------------------------------
Lehman Brothers Holdings Inc. 20,000 1,440,000
-----------------------------------------------------------------------
|
-----------------------------------------------------------------------
MARKET
SHARES VALUE
INVESTMENT BANKING & BROKERAGE-(CONTINUED)
SoundView Technology Group, Inc.(a) 75,000 $ 877,500
=======================================================================
3,080,000
=======================================================================
LEISURE PRODUCTS-0.77%
Mattel, Inc. 60,000 1,161,600
=======================================================================
MANAGED HEALTH CARE-1.14%
Anthem, Inc.(a) 25,000 1,710,750
=======================================================================
METAL & GLASS CONTAINERS-0.81%
Anchor Glass Container Corp.(a) 75,000 1,211,250
=======================================================================
MOVIES & ENTERTAINMENT-2.22%
Pixar, Inc.(a) 9,000 619,290
-----------------------------------------------------------------------
Regal Entertainment Group-Class A 35,000 717,500
-----------------------------------------------------------------------
Viacom Inc.-Class B 50,000 1,993,500
=======================================================================
3,330,290
=======================================================================
MULTI-LINE INSURANCE-1.04%
American Financial Group, Inc. 70,000 1,558,900
=======================================================================
OFFICE SERVICES & SUPPLIES-0.87%
Avery Dennison Corp. 13,000 683,540
-----------------------------------------------------------------------
IKON Office Solutions, Inc.(a) 75,000 630,000
=======================================================================
1,313,540
=======================================================================
OIL & GAS DRILLING-4.57%
Diamond Offshore Drilling, Inc. 45,000 830,250
-----------------------------------------------------------------------
ENSCO International Inc. 65,000 1,712,750
-----------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 50,000 1,890,000
-----------------------------------------------------------------------
Patterson-UTI Energy, Inc.(a) 85,000 2,430,150
=======================================================================
6,863,150
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.99%
BJ Services Co.(a) 15,000 492,150
-----------------------------------------------------------------------
Cooper Cameron Corp.(a) 40,000 1,712,800
-----------------------------------------------------------------------
Key Energy Services, Inc.(a) 60,000 523,800
-----------------------------------------------------------------------
Varco International, Inc.(a) 100,000 1,759,000
=======================================================================
4,487,750
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.13%
Devon Energy Corp. 35,000 1,697,500
=======================================================================
PACKAGED FOODS & MEATS-3.11%
General Mills, Inc. 25,000 1,121,250
-----------------------------------------------------------------------
Hormel Foods Corp. 30,000 740,700
-----------------------------------------------------------------------
Kraft Foods Inc.-Class A 25,000 727,500
-----------------------------------------------------------------------
Smithfield Foods, Inc.(a) 50,000 1,063,000
-----------------------------------------------------------------------
|
FS-140
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PACKAGED FOODS & MEATS-(CONTINUED)
Unilever PLC-ADR (United Kingdom) 30,000 $ 1,026,000
=======================================================================
4,678,450
=======================================================================
PAPER PACKAGING-1.48%
Bemis Co., Inc. 25,000 1,156,000
-----------------------------------------------------------------------
Sonoco Products Co. 50,000 1,063,500
=======================================================================
2,219,500
=======================================================================
PAPER PRODUCTS-0.78%
MeadWestvaco Corp. 45,000 1,166,400
=======================================================================
PHARMACEUTICALS-4.35%
Abbott Laboratories 30,000 1,278,600
-----------------------------------------------------------------------
Forest Laboratories, Inc.(a) 30,000 1,500,300
-----------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(a) 16,000 635,360
-----------------------------------------------------------------------
Medicines Co. (The)(a) 18,000 479,700
-----------------------------------------------------------------------
MGI Pharma, Inc.(a) 20,000 751,200
-----------------------------------------------------------------------
Pfizer Inc. 60,000 1,896,000
=======================================================================
6,541,160
=======================================================================
PROPERTY & CASUALTY INSURANCE-0.66%
Navigators Group, Inc. (The)(a) 31,500 999,180
=======================================================================
PUBLISHING-0.84%
Gannett Co., Inc. 15,000 1,261,650
=======================================================================
RAILROADS-1.14%
Norfolk Southern Corp. 85,000 1,712,750
=======================================================================
REGIONAL BANKS-0.27%
Texas Capital Bancshares, Inc.(a) 30,000 408,000
=======================================================================
REINSURANCE-1.45%
Everest Re Group, Ltd. (Bermuda) 10,000 829,500
-----------------------------------------------------------------------
PartnerRe Ltd. (Bermuda) 25,000 1,356,750
=======================================================================
2,186,250
=======================================================================
RESTAURANTS-1.85%
Brinker International, Inc.(a) 50,000 1,591,500
-----------------------------------------------------------------------
Darden Restaurants, Inc. 35,000 733,250
-----------------------------------------------------------------------
Dave & Buster's, Inc.(a) 35,000 460,250
=======================================================================
2,785,000
=======================================================================
SEMICONDUCTOR EQUIPMENT-2.95%
ATMI, Inc.(a) 55,000 1,264,450
-----------------------------------------------------------------------
Cabot Microelectronics Corp.(a) 20,000 1,140,000
-----------------------------------------------------------------------
Entegris Inc.(a) 85,000 1,118,600
-----------------------------------------------------------------------
KLA-Tencor Corp.(a) 16,000 917,280
=======================================================================
4,440,330
=======================================================================
|
-----------------------------------------------------------------------
MARKET
SHARES VALUE
SEMICONDUCTORS-2.24%
AMIS Holdings, Inc.(a) 125,000 $ 2,518,750
-----------------------------------------------------------------------
Integrated Silicon Solution, Inc.(a) 30,000 423,600
-----------------------------------------------------------------------
Skyworks Solutions, Inc.(a) 50,000 429,000
=======================================================================
3,371,350
=======================================================================
SOFT DRINKS-1.01%
Coca-Cola Enterprises Inc. 75,000 1,512,000
=======================================================================
SPECIALTY CHEMICALS-0.44%
International Flavors & Fragrances Inc. 20,000 662,000
=======================================================================
SPECIALTY STORES-1.64%
Barnes & Noble, Inc.(a) 25,000 745,000
-----------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 40,000 608,000
-----------------------------------------------------------------------
Weight Watchers International, Inc.(a) 30,000 1,107,000
=======================================================================
2,460,000
=======================================================================
STEEL-0.63%
Worthington Industries, Inc. 65,000 947,700
=======================================================================
SYSTEMS SOFTWARE-2.24%
Microsoft Corp. 60,000 1,569,000
-----------------------------------------------------------------------
Oracle Corp.(a) 150,000 1,794,000
=======================================================================
3,363,000
=======================================================================
THRIFTS & MORTGAGE FINANCE-0.64%
PMI Group, Inc. (The) 25,000 955,750
=======================================================================
TRUCKING-1.34%
Overnite Corp.(a) 40,000 886,400
-----------------------------------------------------------------------
P.A.M. Transportation Services, Inc.(a) 60,000 1,134,000
=======================================================================
2,020,400
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.96%
America Movil S.A. de C.V.-Series L ADR
(Mexico) 35,000 833,000
-----------------------------------------------------------------------
NII Holdings Inc.-Class B(a) 8,000 616,720
=======================================================================
1,449,720
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $128,969,032) 136,906,645
=======================================================================
MONEY MARKET FUNDS-6.74%
STIC Liquid Assets Portfolio(b) 5,063,454 5,063,454
-----------------------------------------------------------------------
STIC Prime Portfolio(b) 5,063,454 5,063,454
=======================================================================
Total Money Market Funds (Cost
$10,126,908) 10,126,908
=======================================================================
TOTAL INVESTMENTS-97.86% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $139,095,940) 147,033,553
=======================================================================
|
FS-141
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES
LOANED
MONEY MARKET FUNDS-4.90%
STIC Liquid Assets Portfolio(b)(c) 7,368,309 $ 7,368,309
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $7,368,309) 7,368,309
=======================================================================
TOTAL INVESTMENTS-102.76% (Cost $146,464,249) 154,401,862
=======================================================================
OTHER ASSETS LESS LIABILITIES-(2.76%) (4,151,359)
=======================================================================
NET ASSETS-100.00% $150,250,503
_______________________________________________________________________
=======================================================================
|
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-142
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$128,969,032)* $136,906,645
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $17,495,217) 17,495,217
-----------------------------------------------------------
Receivables for:
Investments sold 15,093,298
-----------------------------------------------------------
Fund shares sold 181,845
-----------------------------------------------------------
Dividends 59,188
-----------------------------------------------------------
Investment for deferred compensation plan 16,463
-----------------------------------------------------------
Other assets 15,810
===========================================================
Total assets 169,768,466
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 11,663,123
-----------------------------------------------------------
Fund shares reacquired 173,022
-----------------------------------------------------------
Deferred compensation plan 16,463
-----------------------------------------------------------
Collateral upon return of securities loaned 7,368,309
-----------------------------------------------------------
Accrued distribution fees 85,663
-----------------------------------------------------------
Accrued trustees' fees 3,500
-----------------------------------------------------------
Accrued transfer agent fees 116,547
-----------------------------------------------------------
Accrued operating expenses 91,336
===========================================================
Total liabilities 19,517,963
===========================================================
Net assets applicable to shares outstanding $150,250,503
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $289,815,552
-----------------------------------------------------------
Undistributed net investment income (loss) (20,376)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (147,482,286)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 7,937,613
===========================================================
$150,250,503
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 81,427,790
___________________________________________________________
===========================================================
Class B $ 48,830,272
___________________________________________________________
===========================================================
Class C $ 19,992,441
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 13,334,888
___________________________________________________________
===========================================================
Class B 8,181,661
___________________________________________________________
===========================================================
Class C 3,351,466
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 6.11
-----------------------------------------------------------
Offering price per share:
(Net asset value of $6.11 divided by
94.50%) $ 6.47
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 5.97
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 5.97
___________________________________________________________
===========================================================
|
* At October 31, 2003, securities with an aggregate market value of $7,182,622
were on loan to brokers.
See Notes to Financial Statements.
FS-143
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,381) $ 576,707
-------------------------------------------------------------------------
Dividends from affiliated money market funds 133,492
-------------------------------------------------------------------------
Securities lending 23,891
=========================================================================
Total investment income 734,090
=========================================================================
EXPENSES:
Advisory fees 1,059,148
-------------------------------------------------------------------------
Administrative services fees 50,000
-------------------------------------------------------------------------
Custodian fees 67,088
-------------------------------------------------------------------------
Distribution fees
Class A 227,193
-------------------------------------------------------------------------
Class B 416,099
-------------------------------------------------------------------------
Class C 180,834
-------------------------------------------------------------------------
Transfer agent fees 803,786
-------------------------------------------------------------------------
Trustees' fees 11,018
-------------------------------------------------------------------------
Other 157,648
=========================================================================
Total expenses 2,972,814
=========================================================================
Less: Fees waived and expense offset arrangements (4,923)
-------------------------------------------------------------------------
Net expenses 2,967,891
=========================================================================
Net investment income (loss) (2,233,801)
=========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
OPTION CONTRACTS:
Net realized gain from:
Investment securities 28,425,892
-------------------------------------------------------------------------
Option contracts written 399,032
=========================================================================
28,824,924
=========================================================================
Change in net unrealized appreciation of investment
securities 21,408,256
=========================================================================
Net gain from investment securities and option contracts 50,233,180
=========================================================================
Net increase in net assets resulting from operations $47,999,379
_________________________________________________________________________
=========================================================================
|
See Notes to Financial Statements.
FS-144
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,233,801) $ (2,977,371)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 28,824,924 (43,488,298)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 21,408,256 7,080,269
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 47,999,379 (39,385,400)
==========================================================================================
Share transactions-net:
Class A 4,435,295 (10,076,931)
------------------------------------------------------------------------------------------
Class B (3,079,891) (8,139,807)
------------------------------------------------------------------------------------------
Class C (4,179,924) (2,937,370)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (2,824,520) (21,154,108)
==========================================================================================
Net increase (decrease) in net assets 45,174,859 (60,539,508)
==========================================================================================
NET ASSETS:
Beginning of year 105,075,644 165,615,152
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(20,376) and $(14,890) for 2003 and 2002,
respectively.) $150,250,503 $105,075,644
__________________________________________________________________________________________
==========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Emerging 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 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 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").
FS-145
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. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. 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 0.85% of the first $1 billion of the Fund's average daily net assets plus 0.80% of the Fund's average daily net assets over $1 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding Rule 12b-1 fees, interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expenses due to offset arrangements, if any) for Class A, Class B and Class C shares to the
FS-146
extent necessary to limit the total annual fund operating expenses of Class A shares to 2.00%. Voluntary fee waivers and/ or reimbursements may be modified or discontinued at any time without further notice to investors. 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 money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $2,037.
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 $50,000 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 Service, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $442,346 for such services.
The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C 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 or Class C 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 and Class C shares paid $227,193, $416,099 and $180,834, 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 $30,155 in front-end sales commissions for the sale of Class A shares and $15,298, 158 and $2,859 from Class A, Class B and Class C shares, respectively, from 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 $2,600 and reductions in custodian fees of $286 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $2,886.
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 $2,283 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
FS-147
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 $7,182,622 were on loan to brokers. The loans were secured by cash collateral of $7,368,309 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 $23,891 for securities lending.
NOTE 7--CALL OPTION CONTRACTS
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------
Beginning of year -- $ --
-------------------------------------------------------------------------------
Written 9,450 685,246
-------------------------------------------------------------------------------
Closed (6,950) (502,703)
-------------------------------------------------------------------------------
Exercised (1,073) (84,720)
-------------------------------------------------------------------------------
Expired (1,427) (97,823)
===============================================================================
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 $ 7,428,287 ------------------------------------------------------------------------------------------ Temporary book/tax differences (20,376) ------------------------------------------------------------------------------------------ Capital loss carryforward (146,972,960) ------------------------------------------------------------------------------------------ Shares of beneficial interest 289,815,552 ========================================================================================== Total net assets $ 150,250,503 __________________________________________________________________________________________ ========================================================================================== |
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 $101,674,105
--------------------------------------------------------------------------------
October 31, 2010 45,298,855
================================================================================
Total capital loss carryforward $146,972,960
________________________________________________________________________________
================================================================================
|
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 $466,748,659 and $471,513,419, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 9,060,561
-------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,632,274)
===============================================================================
Net unrealized appreciation of investment securities $ 7,428,287
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $146,973,575.
|
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2003, undistributed net investment income was increased by $2,228,315, undistributed net realized gains (losses) remained unchanged and shares of beneficial interest decreased by $2,228,315. This reclassification had no effect on net assets of the Fund.
FS-148
NOTE 11--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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 14,150,001 $ 71,539,332 8,175,825 $ 45,450,141
------------------------------------------------------------------------------------------------------------------------
Class B 2,662,059 13,233,376 1,711,610 9,848,093
------------------------------------------------------------------------------------------------------------------------
Class C 1,160,403 5,839,097 1,313,206 7,417,468
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 165,304 856,537 -- --
------------------------------------------------------------------------------------------------------------------------
Class B (168,817) (856,537) -- --
========================================================================================================================
Reacquired:
Class A (13,569,593) (67,960,574) (10,450,880) (55,527,072)
------------------------------------------------------------------------------------------------------------------------
Class B (3,214,850) (15,456,730) (3,545,284) (17,987,900)
------------------------------------------------------------------------------------------------------------------------
Class C (2,057,518) (10,019,021) (1,969,513) (10,354,838)
========================================================================================================================
(873,011) $ (2,824,520) (4,765,036) $(21,154,108)
________________________________________________________________________________________________________________________
========================================================================================================================
|
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------
MARCH 31,2000
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------- OCTOBER 31,
2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.12 $ 5.46 $ 10.50 $ 10.00
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.08)(a) (0.10) (0.04)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.06 (1.26) (4.51) 0.54
========================================================================================================================
Total from investment operations 1.99 (1.34) (4.61) 0.50
========================================================================================================================
Less distributions from net realized gains -- -- (0.43) --
========================================================================================================================
Net asset value, end of period $ 6.11 $ 4.12 $ 5.46 $ 10.50
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 48.30% (24.54)% (45.37)% 5.00%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $81,428 $51,822 $81,114 $147,101
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets 2.07%(c) 1.89% 1.71%(d) 1.68%(e)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.48)%(c) (1.54)% (1.32)% (1.04)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 414% 407% 242% 111%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(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 $64,912,379.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 1.83%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-149
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------------------------------------------------
MARCH 31,2000
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------- OCTOBER 31,
2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.05 $ 5.40 $ 10.47 $ 10.00
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.12)(a) (0.14) (0.07)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.02 (1.23) (4.50) 0.54
========================================================================================================================
Total from investment operations 1.92 (1.35) (4.64) 0.47
========================================================================================================================
Less distributions from net realized gains -- -- (0.43) --
________________________________________________________________________________________________________________________
========================================================================================================================
Net asset value, end of period $ 5.97 $ 4.05 $ 5.40 $ 10.47
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 47.41% (25.00)% (45.81)% 4.70%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $48,830 $36,060 $58,019 $94,740
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets 2.72%(c) 2.55% 2.36%(d) 2.37%(e)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (2.13)%(c) (2.19)% (1.98)% (1.73)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 414% 407% 242% 111%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(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 $41,609,853
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 2.48%.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS C
----------------------------------------------------------
MARCH 31,2000
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------- OCTOBER 31,
2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.05 $ 5.40 $ 10.46 $ 10.00
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.12)(a) (0.14) (0.07)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.02 (1.23) (4.49) 0.53
========================================================================================================================
Total from investment operations 1.92 (1.35) (4.63) 0.46
========================================================================================================================
Less distributions from net realized gains -- -- (0.43) --
========================================================================================================================
Net asset value, end of period $ 5.97 $ 4.05 $ 5.40 $ 10.46
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 47.41% (25.00)% (45.76)% 4.60%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $19,992 $17,194 $26,483 $41,361
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets 2.72%(c) 2.55% 2.36%(d) 2.37%(e)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (2.13)%(c) (2.19)% (1.98)% (1.73)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 414% 407% 242% 111%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(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 $18,083,423
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 2.48%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-150
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.
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-151
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Large Cap Basic Value Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Large Cap Basic Value 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 Large Cap Basic Value 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-152
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.01%
ADVERTISING-5.97%
Interpublic Group of Cos., Inc. (The)(a) 440,500 $ 6,554,640
-----------------------------------------------------------------------
Omnicom Group Inc. 89,300 7,126,140
=======================================================================
13,680,780
=======================================================================
AEROSPACE & DEFENSE-1.88%
Honeywell International Inc. 140,600 4,303,766
=======================================================================
ALUMINUM-0.69%
Alcoa Inc. 50,000 1,578,500
=======================================================================
APPAREL RETAIL-1.83%
Gap, Inc. (The) 220,200 4,201,416
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.24%
Bank of New York Co., Inc. (The) 165,000 5,146,350
=======================================================================
BUILDING PRODUCTS-2.12%
Masco Corp. 176,800 4,862,000
=======================================================================
COMMUNICATIONS EQUIPMENT-1.48%
Motorola, Inc. 251,500 3,402,795
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.33%
Deere & Co. 50,200 3,043,124
=======================================================================
CONSUMER ELECTRONICS-3.80%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 143,270 3,845,367
-----------------------------------------------------------------------
Sony Corp.-ADR (Japan) 138,000 4,857,600
=======================================================================
8,702,967
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.53%
Ceridian Corp.(a) 217,300 4,563,300
-----------------------------------------------------------------------
First Data Corp. 99,200 3,541,440
=======================================================================
8,104,740
=======================================================================
DEPARTMENT STORES-1.50%
May Department Stores Co. (The) 123,000 3,439,080
=======================================================================
DIVERSIFIED BANKS-2.61%
Bank One Corp. 141,000 5,985,450
=======================================================================
DIVERSIFIED CAPITAL MARKETS-3.10%
J.P. Morgan Chase & Co. 198,000 7,108,200
=======================================================================
DIVERSIFIED CHEMICALS-0.66%
Dow Chemical Co. (The) 40,000 1,507,600
=======================================================================
|
-----------------------------------------------------------------------
MARKET
SHARES VALUE
DIVERSIFIED COMMERCIAL SERVICES-2.91%
Cendant Corp.(a) 327,000 $ 6,680,610
=======================================================================
ENVIRONMENTAL SERVICES-3.35%
Waste Management, Inc. 296,750 7,691,760
=======================================================================
FOOD RETAIL-3.96%
Kroger Co. (The)(a) 301,100 5,266,239
-----------------------------------------------------------------------
Safeway Inc.(a) 181,000 3,819,100
=======================================================================
9,085,339
=======================================================================
GENERAL MERCHANDISE STORES-2.34%
Target Corp. 135,100 5,368,874
=======================================================================
HEALTH CARE DISTRIBUTORS-4.10%
Cardinal Health, Inc. 81,000 4,806,540
-----------------------------------------------------------------------
McKesson Corp. 152,000 4,601,040
=======================================================================
9,407,580
=======================================================================
HEALTH CARE EQUIPMENT-1.43%
Baxter International Inc. 123,000 3,269,340
=======================================================================
HEALTH CARE FACILITIES-2.10%
HCA Inc. 125,600 4,804,200
=======================================================================
INDUSTRIAL CONGLOMERATES-5.62%
General Electric Co. 135,000 3,916,350
-----------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 429,400 8,965,872
=======================================================================
12,882,222
=======================================================================
INDUSTRIAL MACHINERY-2.26%
Illinois Tool Works Inc. 70,600 5,192,630
=======================================================================
INSURANCE BROKERS-1.43%
Aon Corp. 150,000 3,285,000
=======================================================================
INVESTMENT BANKING & BROKERAGE-5.25%
Merrill Lynch & Co., Inc. 105,000 6,216,000
-----------------------------------------------------------------------
Morgan Stanley 106,000 5,816,220
=======================================================================
12,032,220
=======================================================================
MANAGED HEALTH CARE-1.48%
Aetna Inc. 59,000 3,387,190
=======================================================================
MOVIES & ENTERTAINMENT-2.62%
Walt Disney Co. (The) 265,800 6,017,712
=======================================================================
MULTI-LINE INSURANCE-1.48%
Hartford Financial Services Group, Inc. (The) 62,000 3,403,800
=======================================================================
OIL & GAS DRILLING-1.38%
Transocean Inc. (Cayman Islands)(a) 164,277 3,152,476
=======================================================================
|
FS-153
MARKET
SHARES VALUE
-----------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-3.91%
Halliburton Co. 143,000 $ 3,414,840
-----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 118,200 5,551,854
=======================================================================
8,966,694
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.87%
Citigroup Inc. 187,293 8,877,688
=======================================================================
PACKAGED FOODS & MEATS-1.88%
Kraft Foods Inc.-Class A 148,000 4,306,800
=======================================================================
PHARMACEUTICALS-4.15%
Aventis S.A. (France) 94,000 4,960,135
-----------------------------------------------------------------------
Wyeth 103,200 4,555,248
=======================================================================
9,515,383
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.36%
ACE Ltd. (Cayman Islands) 150,300 5,410,800
=======================================================================
SYSTEMS SOFTWARE-3.11%
Computer Associates International, Inc. 303,500 7,138,320
=======================================================================
|
-----------------------------------------------------------------------
MARKET
SHARES VALUE
THRIFTS & MORTGAGE FINANCE-3.28%
Fannie Mae 105,000 $ 7,527,450
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $209,262,685) 222,470,856
=======================================================================
MONEY MARKET FUNDS-1.67%
STIC Liquid Assets Portfolio(b) 1,921,637 1,921,637
-----------------------------------------------------------------------
STIC Prime Portfolio(b) 1,921,637 1,921,637
=======================================================================
Total Money Market Funds (Cost
$3,843,274) 3,843,274
=======================================================================
TOTAL INVESTMENTS-98.68% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $213,105,959) 226,314,130
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.42%
STIC Liquid Assets Portfolio(b)(c) 3,248,000 3,248,000
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $3,248,000) 3,248,000
=======================================================================
TOTAL INVESTMENTS-100.10% (Cost $216,353,959) 229,562,130
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.10%) (232,057)
=======================================================================
NET ASSETS-100.00% $229,330,073
_______________________________________________________________________
=======================================================================
|
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-154
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$209,262,685)* $222,470,856
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $7,091,274) 7,091,274
-----------------------------------------------------------
Receivables for:
Investments sold 3,202,279
-----------------------------------------------------------
Fund shares sold 654,638
-----------------------------------------------------------
Dividends 235,431
-----------------------------------------------------------
Investment for deferred compensation plan 20,538
-----------------------------------------------------------
Other assets 39,561
===========================================================
Total assets 233,714,577
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 340,829
-----------------------------------------------------------
Fund shares reacquired 471,895
-----------------------------------------------------------
Deferred compensation plan 20,538
-----------------------------------------------------------
Collateral upon return of securities loaned 3,248,000
-----------------------------------------------------------
Accrued distribution fees 137,978
-----------------------------------------------------------
Accrued trustees' fees 4,277
-----------------------------------------------------------
Accrued transfer agent fees 89,015
-----------------------------------------------------------
Accrued operating expenses 71,972
===========================================================
Total liabilities 4,384,504
===========================================================
Net assets applicable to shares outstanding $229,330,073
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $242,916,748
-----------------------------------------------------------
Undistributed net investment income (loss) (25,218)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (26,769,628)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 13,208,171
===========================================================
$229,330,073
___________________________________________________________
===========================================================
NET ASSETS:
Class A $121,980,357
___________________________________________________________
===========================================================
Class B $ 80,017,850
___________________________________________________________
===========================================================
Class C $ 26,566,037
___________________________________________________________
===========================================================
Class R $ 587,509
___________________________________________________________
===========================================================
Investor Class $ 178,320
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,708,360
___________________________________________________________
===========================================================
Class B 7,174,868
___________________________________________________________
===========================================================
Class C 2,382,697
___________________________________________________________
===========================================================
Class R 51,713
___________________________________________________________
===========================================================
Investor Class 15,657
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.39
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.39 divided by
94.50%) $ 12.05
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 11.15
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 11.15
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 11.36
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 11.39
___________________________________________________________
===========================================================
|
* At October 31, 2003, securities with an aggregate market value of $3,020,640
were on loan to brokers.
See Notes to Financial Statements.
FS-155
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $9,059) $ 2,729,204
-------------------------------------------------------------------------
Dividends from affiliated money market funds 110,758
-------------------------------------------------------------------------
Interest 61
-------------------------------------------------------------------------
Securities lending 195
=========================================================================
Total investment income 2,840,218
=========================================================================
EXPENSES:
Advisory fees 1,211,828
-------------------------------------------------------------------------
Administrative services fees 50,000
-------------------------------------------------------------------------
Custodian fees 42,276
-------------------------------------------------------------------------
Distribution fees:
Class A 378,423
-------------------------------------------------------------------------
Class B 696,925
-------------------------------------------------------------------------
Class C 239,648
-------------------------------------------------------------------------
Class R 934
-------------------------------------------------------------------------
Investor Class 16
-------------------------------------------------------------------------
Transfer agent fees 659,290
-------------------------------------------------------------------------
Trustees' fees 12,092
-------------------------------------------------------------------------
Other 193,965
=========================================================================
Total expenses 3,485,397
=========================================================================
Less: Fees waived and expense offset arrangements (5,224)
=========================================================================
Net expenses 3,480,173
=========================================================================
Net investment income (loss) (639,955)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (9,803,985)
-------------------------------------------------------------------------
Foreign currencies 10,161
=========================================================================
(9,793,824)
=========================================================================
Change in net unrealized appreciation of investment
securities 51,420,584
-------------------------------------------------------------------------
Net gain from investment securities and foreign currencies 41,626,760
=========================================================================
Net increase in net assets resulting from operations $40,986,805
_________________________________________________________________________
=========================================================================
|
See Notes to Financial Statements.
FS-156
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (639,955) $ (400,729)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (9,793,824) (13,193,071)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 51,420,584 (26,617,408)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 40,986,805 (40,211,208)
==========================================================================================
Share transactions-net:
Class A 5,382,960 47,013,800
------------------------------------------------------------------------------------------
Class B 2,113,303 19,109,813
------------------------------------------------------------------------------------------
Class C (14,173) 6,186,422
------------------------------------------------------------------------------------------
Class R 537,385 10,003
------------------------------------------------------------------------------------------
Investor Class 177,572 --
==========================================================================================
Net increase in net assets resulting from share
transactions 8,197,047 72,320,038
==========================================================================================
Net increase in net assets 49,183,852 32,108,830
==========================================================================================
NET ASSETS:
Beginning of year 180,146,221 148,037,391
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(25,218) and $(18,649) for 2003 and 2002,
respectively) $229,330,073 $180,146,221
__________________________________________________________________________________________
==========================================================================================
|
See Notes to Financial Statements.
FS-157
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Large Cap Basic Value 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.
FS-158
E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
F. 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.
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 0.60% of the first $1 billion of the Fund's average daily net assets, plus 0.575% over $1 billion up to and including $2 billion of the Fund's average daily net assets and 0.55% of the Fund's average daily net assets over $2 billion. 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 $1,844.
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 $50,000 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. During the year ended October 31, 2003, AISI retained $333,919 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 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 the 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 $378,423, $696,925, $239,648, $934 and $16, 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 $57,471 in front-end sales commissions from the sale of Class A shares and $436, $0, $4,755 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 $3,169 and reductions in custodian fees of $211 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $3,380.
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 $2,422 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
FS-159
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 $3,020,640 were on loan to brokers. The loans were secured by cash collateral of $3,248,000, 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 $195 for securities lending.
FS-160
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 October 31, 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 11,028,647 ----------------------------------------------------------- Temporary book/tax differences (25,218) ----------------------------------------------------------- Capital loss carryforward (24,590,104) ----------------------------------------------------------- Shares of beneficial interest 242,916,748 =========================================================== Total net assets $229,330,073 ___________________________________________________________ =========================================================== |
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 $ 2,651,488
----------------------------------------------------------
October 31, 2010 $13,408,092
----------------------------------------------------------
October 31, 2011 $ 8,530,524
==========================================================
Total capital loss carryforward $24,590,104
__________________________________________________________
==========================================================
|
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 $95,824,492 and $78,360,698, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $20,865,000
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (9,836,353)
===========================================================
Net unrealized appreciation of investment
securities $11,028,647
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $218,533,483.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses and foreign currency transactions, on October 31, 2003, undistributed net investment income was increased by $633,386, undistributed net realized gains decreased by $10,161 and shares of beneficial interest decreased by $623,225. This reclassification had no effect on the net assets of the Fund.
FS-161
NOTE 10--SHARE INFORMATION
The Fund currently consists of five different classes of shares: Class A shares, Class B shares, Class C shares, Class R 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 and 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 5,695,229 $ 56,588,456 12,345,842 $130,431,434
----------------------------------------------------------------------------------------------------------------------
Class B 2,611,379 25,467,901 4,427,046 47,877,276
----------------------------------------------------------------------------------------------------------------------
Class C 936,198 9,069,047 1,524,511 16,806,696
----------------------------------------------------------------------------------------------------------------------
Class R* 59,714 632,113 862 10,003
----------------------------------------------------------------------------------------------------------------------
Investor Class** 30,507 346,714 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 315,247 3,158,288 69,318 788,677
----------------------------------------------------------------------------------------------------------------------
Class B (321,047) (3,158,288) (71,494) (788,677)
======================================================================================================================
Reacquired:
Class A (5,558,986) (54,363,784) (8,433,346) (84,206,311)
----------------------------------------------------------------------------------------------------------------------
Class B (2,170,734) (20,196,310) (2,706,026) (27,978,786)
----------------------------------------------------------------------------------------------------------------------
Class C (955,066) (9,083,220) (1,028,142) (10,620,274)
----------------------------------------------------------------------------------------------------------------------
Class R* (8,863) (94,728) -- --
----------------------------------------------------------------------------------------------------------------------
Investor Class** (14,850) (169,142) -- --
======================================================================================================================
618,728 $ 8,197,047 6,128,571 $ 72,320,038
______________________________________________________________________________________________________________________
======================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Investor Class Shares commenced sales on September 30, 2003.
FS-162
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
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.
FS-163
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------------------------------
AUGUST 1, 2000
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------------------------- OCTOBER 31,
2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.07 $ 10.86 $ 12.02 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.06)(a) (0.06)(a) 0.00
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.15 (1.73) (1.05) 1.17
=================================================================================================================================
Total from investment operations 2.08 (1.79) (1.11) 1.17
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.03) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.02) --
=================================================================================================================================
Total distributions -- -- (0.05) --
=================================================================================================================================
Net asset value, end of period $ 11.15 $ 9.07 $ 10.86 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 22.93% (16.48)% (9.25)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $80,018 $63,977 $58,681 $2,815
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.07%(c) 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.07%(c) 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.66)%(c) (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 41% 37% 18% 57%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 $69,692,469.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-164
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------------------
AUGUST 1, 2000
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------------------------- OCTOBER 31,
2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.07 $ 10.85 $ 12.02 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.15 (1.72) (1.06) 1.17
=================================================================================================================================
Total from investment operations 2.08 (1.78) (1.12) 1.17
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.03) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.02) --
=================================================================================================================================
Total distributions -- -- (0.05) --
=================================================================================================================================
Net asset value, end of period $ 11.15 $ 9.07 $ 10.85 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 22.93% (16.41)% (9.33)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,566 $21,775 $20,680 $1,248
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.07%(c) 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.07%(c) 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.66)%(c) (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 41% 37% 18% 57%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 $23,964,822.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS R
-------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2000
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.20 $ 11.60
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) 0.00(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.18 (2.40)
=============================================================================================
Total from investment operations 2.16 (2.40)
=============================================================================================
Net asset value, end of period $11.36 $ 9.20
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 23.48% (20.69)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 588 $ 8
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets: 1.57%(c) 1.54%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (0.16)%(c) (0.05)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 41% 37%
_____________________________________________________________________________________________
=============================================================================================
|
(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 $186,789.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-165
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
------------------
SEPTEMBER 30, 2003
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2003
----------------------------------------------------------------------------------
Net asset value, beginning of period $10.98
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00(a)
----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.41
==================================================================================
Total from investment operations 0.41
==================================================================================
Net asset value, end of period $11.39
__________________________________________________________________________________
==================================================================================
Total return(b) 3.73%
__________________________________________________________________________________
==================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 178
__________________________________________________________________________________
==================================================================================
Ratio of expenses to average net assets: 1.25%(c)
==================================================================================
Ratio of net investment income to average net assets 0.16%
__________________________________________________________________________________
==================================================================================
Portfolio turnover rate(d) 41%
__________________________________________________________________________________
==================================================================================
|
(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 $76,145.
(d) Not annualized for periods less than one year.
NOTE 12--SUBSEQUENT EVENTS
On November 3, 2003, INVESCO Value Equity Fund ("Selling Fund") transferred substantially all of its assets to the Fund in exchange for shares of the Selling Fund in a tax-free reorganization.
The results of the reorganization are as follows: The acquisition was accomplished by a tax-free exchange of 7,818,290 shares of the Fund for 4,958,149 shares of INVESCO Value Equity Fund outstanding as of the open of business on November 3, 2003. INVESCO Value Equity Fund's net assets at that date of $89,014,605 including $14,973,392 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $229,149,218. Included in net assets of the acquired fund is undistributed net investment income (loss) of $(33,100) and undistributed net realized gain (loss) of $(6,269,110) for INVESCO Value Equity Fund.
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
FS-166
NOTE 12--SUBSEQUENT EVENTS (CONTINUED)
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-167
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Large Cap Growth Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Large Cap 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 Large Cap 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-168
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.13%
AEROSPACE & DEFENSE-0.71%
United Technologies Corp. 27,000 $ 2,286,630
========================================================================
APPAREL RETAIL-0.77%
Gap, Inc. (The) 131,000 2,499,480
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.45%
Coach, Inc.(a) 132,000 4,682,040
========================================================================
APPLICATION SOFTWARE-1.28%
Amdocs Ltd. (United Kingdom)(a) 91,000 1,952,860
------------------------------------------------------------------------
SAP A.G.-ADR (Germany) 60,000 2,192,400
========================================================================
4,145,260
========================================================================
BIOTECHNOLOGY-3.17%
Amgen Inc.(a) 59,000 3,643,840
------------------------------------------------------------------------
Genentech, Inc.(a) 80,300 6,582,191
========================================================================
10,226,031
========================================================================
CASINOS & GAMING-2.04%
International Game Technology 201,200 6,589,300
========================================================================
COMMUNICATIONS EQUIPMENT-6.96%
Cisco Systems, Inc.(a) 611,200 12,822,976
------------------------------------------------------------------------
Corning Inc.(a) 230,000 2,525,400
------------------------------------------------------------------------
Juniper Networks, Inc.(a) 188,000 3,382,120
------------------------------------------------------------------------
QLogic Corp.(a) 35,000 1,961,750
------------------------------------------------------------------------
UTStarcom, Inc.(a) 56,000 1,764,000
========================================================================
22,456,246
========================================================================
COMPUTER & ELECTRONICS RETAIL-2.13%
Best Buy Co., Inc. 118,000 6,880,580
========================================================================
COMPUTER HARDWARE-2.58%
Dell Inc.(a) 230,900 8,340,108
========================================================================
COMPUTER STORAGE & PERIPHERALS-4.50%
EMC Corp.(a) 505,000 6,989,200
------------------------------------------------------------------------
Network Appliance, Inc.(a) 132,000 3,257,760
------------------------------------------------------------------------
SanDisk Corp.(a) 25,000 2,015,000
------------------------------------------------------------------------
Seagate Technology (Cayman Islands) 98,000 2,252,040
========================================================================
14,514,000
========================================================================
CONSUMER FINANCE-3.90%
American Express Co. 76,800 3,604,224
------------------------------------------------------------------------
Capital One Financial Corp. 32,000 1,945,600
------------------------------------------------------------------------
MBNA Corp. 80,000 1,980,000
------------------------------------------------------------------------
SLM Corp. 129,000 5,051,640
========================================================================
12,581,464
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES-0.68%
First Data Corp. 61,600 $ 2,199,120
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-4.01%
Apollo Group, Inc.-Class A(a) 92,000 5,844,760
------------------------------------------------------------------------
Cendant Corp.(a) 347,000 7,089,210
========================================================================
12,933,970
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.91%
Rockwell Automation, Inc. 95,000 2,949,750
========================================================================
FOOTWEAR-0.61%
NIKE, Inc.-Class B 31,000 1,980,900
========================================================================
GENERAL MERCHANDISE STORES-0.87%
Dollar General Corp. 125,000 2,808,750
========================================================================
HEALTH CARE EQUIPMENT-7.07%
Becton, Dickinson & Co. 65,000 2,376,400
------------------------------------------------------------------------
Boston Scientific Corp.(a) 104,000 7,042,880
------------------------------------------------------------------------
Guidant Corp. 42,000 2,142,420
------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 35,200 2,047,232
------------------------------------------------------------------------
Stryker Corp. 40,600 3,293,066
------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 92,800 5,921,568
========================================================================
22,823,566
========================================================================
HEALTH CARE SERVICES-1.60%
Caremark Rx, Inc.(a) 124,000 3,106,200
------------------------------------------------------------------------
IMS Health Inc. 87,000 2,047,110
========================================================================
5,153,310
========================================================================
HEALTH CARE SUPPLIES-0.80%
Alcon, Inc. (Switzerland) 46,700 2,573,637
========================================================================
HOME ENTERTAINMENT SOFTWARE-1.27%
Electronic Arts Inc.(a) 41,300 4,090,352
========================================================================
HOME IMPROVEMENT RETAIL-2.98%
Home Depot, Inc. (The) 126,000 4,670,820
------------------------------------------------------------------------
Lowe's Cos., Inc. 84,000 4,950,120
========================================================================
9,620,940
========================================================================
HOUSEWARES & SPECIALTIES-0.78%
Fortune Brands, Inc. 38,600 2,514,790
========================================================================
HYPERMARKETS & SUPER CENTERS-1.88%
Wal-Mart Stores, Inc. 102,700 6,054,165
========================================================================
INDUSTRIAL CONGLOMERATES-1.03%
3M Co. 42,000 3,312,540
========================================================================
INDUSTRIAL MACHINERY-0.60%
Dover Corp. 50,000 1,951,000
========================================================================
|
FS-169
MARKET
SHARES VALUE
------------------------------------------------------------------------
INTERNET RETAIL-3.03%
Amazon.com, Inc.(a) 131,600 $ 7,161,672
------------------------------------------------------------------------
eBay Inc.(a) 46,600 2,606,804
========================================================================
9,768,476
========================================================================
INTERNET SOFTWARE & SERVICES-2.44%
Yahoo! Inc.(a) 179,900 7,861,630
========================================================================
IT CONSULTING & OTHER SERVICES-0.80%
Accenture Ltd.-Class A (Bermuda)(a) 110,000 2,574,000
========================================================================
MANAGED HEALTH CARE-2.44%
Anthem, Inc.(a) 41,200 2,819,316
------------------------------------------------------------------------
UnitedHealth Group Inc. 99,200 5,047,296
========================================================================
7,866,612
========================================================================
OFFICE ELECTRONICS-0.77%
Canon Inc. (Japan) 51,000 2,469,239
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.81%
Citigroup Inc. 123,000 5,830,200
========================================================================
PERSONAL PRODUCTS-1.23%
Avon Products, Inc. 58,300 3,962,068
========================================================================
PHARMACEUTICALS-3.30%
Mylan Laboratories Inc. 106,850 2,580,428
------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 86,000 4,892,540
------------------------------------------------------------------------
Wyeth 72,000 3,178,080
========================================================================
10,651,048
========================================================================
RESTAURANTS-0.65%
Starbucks Corp.(a) 66,000 2,085,600
========================================================================
SEMICONDUCTOR EQUIPMENT-1.09%
Applied Materials, Inc.(a) 150,000 3,505,500
========================================================================
SEMICONDUCTORS-7.91%
Altera Corp.(a) 99,800 2,018,954
------------------------------------------------------------------------
Analog Devices, Inc.(a) 58,400 2,588,872
------------------------------------------------------------------------
Intel Corp. 467,000 15,434,350
------------------------------------------------------------------------
Linear Technology Corp. 76,900 3,276,709
------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 50,000 2,193,500
========================================================================
25,512,385
========================================================================
SOFT DRINKS-0.90%
PepsiCo, Inc. 61,000 2,917,020
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
SPECIALTY STORES-4.33%
AutoNation, Inc.(a) 100,000 $ 1,870,000
------------------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 72,000 3,041,280
------------------------------------------------------------------------
Staples, Inc.(a) 199,800 5,358,636
------------------------------------------------------------------------
Tiffany & Co. 78,000 3,701,100
========================================================================
13,971,016
========================================================================
SYSTEMS SOFTWARE-9.35%
Adobe Systems Inc. 84,000 3,682,560
------------------------------------------------------------------------
Computer Associates International, Inc. 72,000 1,693,440
------------------------------------------------------------------------
Microsoft Corp. 414,600 10,841,790
------------------------------------------------------------------------
Oracle Corp.(a) 212,600 2,542,696
------------------------------------------------------------------------
Symantec Corp.(a) 49,000 3,265,850
------------------------------------------------------------------------
VERITAS Software Corp.(a) 225,000 8,133,750
========================================================================
30,160,086
========================================================================
THRIFTS & MORTGAGE FINANCE-0.66%
Washington Mutual, Inc. 48,700 2,130,625
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.84%
Nextel Communications, Inc.-Class A(a) 245,400 5,938,680
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $250,184,300) 313,372,114
========================================================================
MONEY MARKET FUNDS-3.30%
STIC Liquid Assets Portfolio(b) 5,325,601 5,325,601
------------------------------------------------------------------------
STIC Prime Portfolio(b) 5,325,601 5,325,601
========================================================================
Total Money Market Funds (Cost
$10,651,202) 10,651,202
========================================================================
TOTAL INVESTMENTS-100.43% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $260,835,502) 324,023,316
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.85%
STIC Liquid Assets Portfolio(b)(c) 5,969,563 5,969,563
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $5,969,563) 5,969,563
========================================================================
TOTAL INVESTMENTS-102.28% (Cost $266,805,065) 329,992,879
========================================================================
OTHER ASSETS LESS LIABILITIES-(2.28%) (7,355,958)
========================================================================
NET ASSETS-100.00% $322,636,921
________________________________________________________________________
========================================================================
|
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-170
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$250,184,300)* $313,372,114
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $16,620,765) 16,620,765
-----------------------------------------------------------
Foreign currencies, at value (cost $2,276) 2,287
-----------------------------------------------------------
Receivables for:
Investments sold 4,752,804
-----------------------------------------------------------
Fund shares sold 415,069
-----------------------------------------------------------
Dividends 184,733
-----------------------------------------------------------
Investment for deferred compensation plan 25,159
-----------------------------------------------------------
Other assets 32,756
===========================================================
Total assets 335,405,687
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 5,638,174
-----------------------------------------------------------
Fund shares reacquired 645,625
-----------------------------------------------------------
Deferred compensation plan 25,159
-----------------------------------------------------------
Collateral upon return of securities loaned 5,969,563
-----------------------------------------------------------
Accrued distribution fees 183,792
-----------------------------------------------------------
Accrued trustees' fees 5,997
-----------------------------------------------------------
Accrued transfer agent fees 201,861
-----------------------------------------------------------
Accrued operating expenses 98,595
===========================================================
Total liabilities 12,768,766
===========================================================
Net assets applicable to shares outstanding $322,636,921
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $661,651,023
-----------------------------------------------------------
Undistributed net investment income (loss) (32,869)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and futures contracts (402,169,057)
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 63,187,824
===========================================================
$322,636,921
___________________________________________________________
===========================================================
NET ASSETS:
Class A $154,052,105
___________________________________________________________
===========================================================
Class B $122,011,241
___________________________________________________________
===========================================================
Class C $ 44,272,422
___________________________________________________________
===========================================================
Class R $ 2,126,829
___________________________________________________________
===========================================================
Investor Class $ 174,324
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 17,349,490
___________________________________________________________
===========================================================
Class B 14,166,195
___________________________________________________________
===========================================================
Class C 5,137,113
___________________________________________________________
===========================================================
Class R 239,758
___________________________________________________________
===========================================================
Investor Class 19,630
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 8.88
-----------------------------------------------------------
Offering price per share:
(Net asset value of $8.88 divided
by 94.50%) $ 9.40
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 8.61
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 8.62
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 8.87
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 8.88
___________________________________________________________
===========================================================
|
* At October 31, 2003, securities with an aggregate market value of $5,853,935
were on loan to brokers.
See Notes to Financial Statements.
FS-171
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $24,308) $ 2,022,318
--------------------------------------------------------------------------
Dividends from affiliated money market funds 101,100
--------------------------------------------------------------------------
Interest 6,536
--------------------------------------------------------------------------
Securities lending 5,580
==========================================================================
Total investment income 2,135,534
==========================================================================
EXPENSES:
Advisory fees 1,987,347
--------------------------------------------------------------------------
Administrative services fees 91,795
--------------------------------------------------------------------------
Custodian fees 54,586
--------------------------------------------------------------------------
Distribution fees:
Class A 416,198
--------------------------------------------------------------------------
Class B 1,075,412
--------------------------------------------------------------------------
Class C 376,000
--------------------------------------------------------------------------
Class R 4,613
--------------------------------------------------------------------------
Investor Class 5
--------------------------------------------------------------------------
Transfer agent fees 1,515,190
--------------------------------------------------------------------------
Trustees' fees 13,398
--------------------------------------------------------------------------
Other 244,762
==========================================================================
Total expenses 5,779,306
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (9,603)
==========================================================================
Net expenses 5,769,703
==========================================================================
Net investment income (loss) (3,634,169)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (11,279,810)
--------------------------------------------------------------------------
Foreign currencies (22,563)
--------------------------------------------------------------------------
Futures contracts (254,779)
==========================================================================
(11,557,152)
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 66,633,066
--------------------------------------------------------------------------
Foreign currencies (138)
==========================================================================
66,632,928
==========================================================================
Net gain from investment securities, foreign currencies and
futures contracts 55,075,776
==========================================================================
Net increase in net assets resulting from operations $ 51,441,607
__________________________________________________________________________
==========================================================================
|
See Notes to Financial Statements.
FS-172
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (3,634,169) $ (4,375,738)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities, foreign
currencies, futures contracts and option contracts (11,557,152) (87,652,595)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 66,632,928 38,162,681
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 51,441,607 (53,865,652)
==========================================================================================
Share transactions-net:
Class A 24,813,254 (10,042,539)
------------------------------------------------------------------------------------------
Class B (2,160,788) (18,237,379)
------------------------------------------------------------------------------------------
Class C 594,530 (12,801,049)
------------------------------------------------------------------------------------------
Class R 1,830,726 10,502
------------------------------------------------------------------------------------------
Investor Class 173,236 --
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 25,250,958 (41,070,465)
==========================================================================================
Net increase (decrease) in net assets 76,692,565 (94,936,117)
==========================================================================================
NET ASSETS:
Beginning of year 245,944,356 340,880,473
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(32,869) and $(25,407) for 2003 and 2002,
respectively) $322,636,921 $245,944,356
__________________________________________________________________________________________
==========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Large Cap 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 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
FS-173
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 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. 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
FS-174
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.
I. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. 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 $1 billion of the Fund's average daily net assets, plus 0.70% over $1 billion up to and including $2 billion of the Fund's average daily net assets and 0.625% of the Fund's average daily net assets over $2 billion. 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 money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $1,994. Under a prior agreement to limit the aggregate costs of certain shareholder services provided by third party administrators, AIM reimbursed fees of $2,430 for Class A, Class B, Class C and Class R shares based on the relative net assets of those classes.
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 $91,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $793,265 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 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 $416,198, $1,075,412, $376,000, $4,613 and $5, 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 $64,104 in front-end sales commissions from the sale of Class A shares and $711, $69, $4,058 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 $5,152 and reductions in custodian fees of $27 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $5,179.
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 $2,539 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
FS-175
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 $5,853,935 were on loan to brokers. The loans were secured by cash collateral of $5,969,563 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 $5,580 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 $ 61,303,166 ------------------------------------------------------------ Temporary book/tax differences (32,869) ------------------------------------------------------------ Capital loss carryforward (400,284,399) ------------------------------------------------------------ Shares of beneficial interest 661,651,023 ============================================================ Total net assets $ 322,636,921 ____________________________________________________________ ============================================================ |
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 straddle deferrals. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $10.
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 $ 380,100
------------------------------------------------------
October 31, 2008 27,182,658
------------------------------------------------------
October 31, 2009 267,323,492
------------------------------------------------------
October 31, 2010 94,116,910
------------------------------------------------------
October 31, 2011 11,281,239
======================================================
Total capital loss carryforward $400,284,399
______________________________________________________
======================================================
|
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 $332,300,069 and $313,469,304, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $64,755,309
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,452,153)
===========================================================
Net unrealized appreciation of investment
securities $61,303,156
___________________________________________________________
===========================================================
Cost of investments for tax purposes is
$268,689,723.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currencies and net operating losses, on October 31, 2003, undistributed net investment income was increased by $3,626,707, undistributed net realized gain was increased by $22,563 and shares of beneficial interest decreased by $3,649,270. This reclassification had no effect on the net assets of the Fund.
FS-176
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 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 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 9,469,394 $73,883,856 5,159,669 $ 44,948,977
--------------------------------------------------------------------------------------------------------------------------
Class B 4,041,264 29,817,268 3,444,001 28,987,280
--------------------------------------------------------------------------------------------------------------------------
Class C 2,208,427 16,412,874 1,465,202 12,332,848
--------------------------------------------------------------------------------------------------------------------------
Class R* 278,067 2,156,076 1,259 10,502
--------------------------------------------------------------------------------------------------------------------------
Investor Class** 20,194 178,134 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 325,063 2,536,902 136,498 1,177,906
--------------------------------------------------------------------------------------------------------------------------
Class B (334,300) (2,536,902) (139,167) (1,177,906)
==========================================================================================================================
Reacquired:
Class A (6,726,902) (51,607,504) (6,691,678) (56,169,422)
--------------------------------------------------------------------------------------------------------------------------
Class B (3,989,440) (29,441,154) (5,553,485) (46,046,753)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,147,493) (15,818,344) (3,059,594) (25,133,897)
--------------------------------------------------------------------------------------------------------------------------
Class R* (39,568) (325,350) -- --
--------------------------------------------------------------------------------------------------------------------------
Investor Class** (564) (4,898) -- --
==========================================================================================================================
3,104,142 $25,250,958 (5,237,295) $(41,070,465)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Investor Class shares commenced sales on September 30, 2003.
FS-177
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
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.
CLASS B
----------------------------------------------------------------
APRIL 5, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.20 $ 8.67 $ 17.54 $ 11.25 $11.02
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a) (0.08)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.53 (1.33) (8.71) 6.56 0.31
==============================================================================================================================
Total from investment operations 1.41 (1.47) (8.87) 6.29 0.23
==============================================================================================================================
Net asset value, end of period $ 8.61 $ 7.20 $ 8.67 $ 17.54 $11.25
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 19.58% (16.96)% (50.57)% 55.91% 2.09%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,011 $104,040 $144,747 $210,224 $5,183
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets 2.47%(c) 2.35% 2.23% 2.24% 2.23%(d)(e)
==============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.66)%(c) (1.66)% (1.39)% (1.48)% (1.29)%(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 $107,541,190.
(d) Annualized.
(e) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 4.33% (annualized).
(f) Not annualized for periods less than one year.
FS-178
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------
APRIL 5, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.21 $ 8.67 $ 17.55 $ 11.25 $11.02
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a) (0.08)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.53 (1.32) (8.72) 6.57 0.31
============================================================================================================================
Total from investment operations 1.41 (1.46) (8.88) 6.30 0.23
============================================================================================================================
Net asset value, end of period $ 8.62 $ 7.21 $ 8.67 $ 17.55 $11.25
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 19.56% (16.84)% (50.60)% 56.00% 2.09%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,272 $ 36,575 $ 57,865 $79,392 $ 901
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 2.47%(c) 2.35% 2.23% 2.24% 2.23%(d)(e)
============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.66)%(c) (1.66)% (1.39)% (1.48)% (1.29)%(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 $37,600,034.
(d) Annualized.
(e) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 4.33% (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 $ 7.37 $ 8.40
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.04)(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.59 (0.99)
=============================================================================================
Total from investment operations 1.50 (1.03)
=============================================================================================
Net asset value, end of period $ 8.87 $ 7.37
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 20.35% (12.26)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,127 $ 9
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 1.97%(c) 1.85%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (1.16)%(c) (1.16)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 123% 111%
_____________________________________________________________________________________________
=============================================================================================
|
(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 $922,495.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-179
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
------------------
SEPTEMBER 30, 2003
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2003
----------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.24
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a)
----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.65
==================================================================================
Total from investment operations 0.64
==================================================================================
Net asset value, end of period $ 8.88
__________________________________________________________________________________
==================================================================================
Total return(b) 7.77%
__________________________________________________________________________________
==================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 174
__________________________________________________________________________________
==================================================================================
Ratio of expenses to average net assets 1.56%(c)
==================================================================================
Ratio of net investment income (loss) to average net assets (0.75)%(c)
__________________________________________________________________________________
==================================================================================
Portfolio turnover rate(d) 123%
__________________________________________________________________________________
==================================================================================
|
(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 $24,659.
(d) Not annualized for periods less than one year.
NOTE 12--SUBSEQUENT EVENTS
On November 3, 2003, INVESCO Growth Fund ("Selling Fund") transferred substantially all of its assets to the Fund in exchange for shares of the Selling Fund in a tax-free reorganization.
The results of the reorganization are as follows: The acquisition was accomplished by a tax-free exchange of 51,442,688 shares of the Fund for 234,385,533 shares of INVESCO Growth Fund outstanding as of the open of business on November 3, 2003. INVESCO Growth Fund's net assets at that date of $456,983,407 including $93,333,500 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $322,706,968. Included in net assets of the acquired fund is undistributed net investment income (loss) of $(1,103,356) and undistributed net realized gain (loss) of $(1,579,650,080) for INVESCO Growth Fund.
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
FS-180
NOTE 12--SUBSEQUENT EVENTS (CONTINUED)
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-181
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Mid Cap Growth Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Mid Cap 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 Mid Cap 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-182
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.68%
ADVERTISING-1.88%
Lamar Advertising Co.(a) 75,000 $ 2,272,500
--------------------------------------------------------------------------
Omnicom Group Inc. 23,000 1,835,400
==========================================================================
4,107,900
==========================================================================
AEROSPACE & DEFENSE-0.85%
L-3 Communications Holdings, Inc.(a) 40,000 1,869,600
==========================================================================
AIRLINES-0.26%
Ryanair Holdings PLC-ADR (Ireland)(a) 11,000 566,500
==========================================================================
APPAREL RETAIL-1.30%
Foot Locker, Inc. 65,000 1,163,500
--------------------------------------------------------------------------
TJX Cos., Inc. (The) 80,000 1,679,200
==========================================================================
2,842,700
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.39%
V. F. Corp. 20,000 849,000
==========================================================================
APPLICATION SOFTWARE-3.73%
Amdocs Ltd. (United Kingdom)(a) 65,000 1,394,900
--------------------------------------------------------------------------
Citrix Systems, Inc.(a) 50,000 1,264,000
--------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 32,000 1,103,040
--------------------------------------------------------------------------
Intuit Inc.(a) 15,000 749,700
--------------------------------------------------------------------------
Macromedia, Inc.(a) 55,000 1,051,050
--------------------------------------------------------------------------
PeopleSoft, Inc.(a) 125,000 2,595,000
==========================================================================
8,157,690
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.81%
Investors Financial Services Corp. 50,000 1,766,500
==========================================================================
AUTO PARTS & EQUIPMENT-0.45%
Autoliv, Inc. 30,000 993,600
==========================================================================
BIOTECHNOLOGY-4.33%
Angiotech Pharmaceuticals, Inc. (Canada)(a) 31,000 1,417,630
--------------------------------------------------------------------------
Celgene Corp.(a) 32,000 1,334,080
--------------------------------------------------------------------------
Cephalon, Inc.(a) 40,000 1,878,400
--------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 33,000 1,801,140
--------------------------------------------------------------------------
ICOS Corp.(a) 14,000 654,080
--------------------------------------------------------------------------
Invitrogen Corp.(a) 21,000 1,335,390
--------------------------------------------------------------------------
MedImmune, Inc.(a) 40,000 1,066,400
==========================================================================
9,487,120
==========================================================================
BROADCASTING & CABLE TV-1.86%
Cox Radio, Inc.-Class A(a) 50,000 1,106,000
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
BROADCASTING & CABLE TV-(CONTINUED)
Univision Communications Inc.-Class A(a) 30,000 $ 1,018,500
--------------------------------------------------------------------------
Westwood One, Inc.(a) 65,000 1,945,450
==========================================================================
4,069,950
==========================================================================
BUILDING PRODUCTS-0.50%
Masco Corp. 40,000 1,100,000
==========================================================================
COMMUNICATIONS EQUIPMENT-3.71%
Avaya Inc.(a) 120,000 1,552,800
--------------------------------------------------------------------------
NetScreen Technologies, Inc.(a) 30,000 798,600
--------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 27,000 1,191,240
--------------------------------------------------------------------------
UTStarcom, Inc.(a) 145,000 4,567,500
==========================================================================
8,110,140
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.72%
Best Buy Co., Inc. 27,000 1,574,370
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.20%
SanDisk Corp.(a) 17,000 1,370,200
--------------------------------------------------------------------------
Seagate Technology (Cayman Islands) 55,000 1,263,900
==========================================================================
2,634,100
==========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.48%
AGCO Corp.(a) 180,000 3,240,000
==========================================================================
CONSUMER FINANCE-1.13%
Capital One Financial Corp. 19,000 1,155,200
--------------------------------------------------------------------------
First Marblehead Corp. (The)(a) 60,000 1,329,000
==========================================================================
2,484,200
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.02%
Affiliated Computer Services, Inc.-Class A(a) 46,000 2,250,780
--------------------------------------------------------------------------
DST Systems, Inc.(a) 50,000 1,891,000
--------------------------------------------------------------------------
Fiserv, Inc.(a) 70,000 2,472,400
==========================================================================
6,614,180
==========================================================================
DEPARTMENT STORES-0.95%
Kohl's Corp.(a) 37,000 2,074,590
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.81%
ARAMARK Corp.-Class B(a) 30,000 801,600
--------------------------------------------------------------------------
University of Phoenix Online(a) 14,000 962,640
==========================================================================
1,764,240
==========================================================================
|
FS-183
MARKET
SHARES VALUE
--------------------------------------------------------------------------
ELECTRONIC MANUFACTURING SERVICES-0.29%
Celestica Inc. (Canada)(a) 45,000 $ 639,000
==========================================================================
EMPLOYMENT SERVICES-0.51%
Manpower Inc. 24,000 1,113,600
==========================================================================
ENVIRONMENTAL SERVICES-0.63%
Waste Connections, Inc.(a) 40,000 1,387,200
==========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.41%
Monsanto Co. 36,000 901,800
==========================================================================
GENERAL MERCHANDISE STORES-0.26%
99 Cents Only Stores(a) 19,000 565,630
==========================================================================
HEALTH CARE DISTRIBUTORS-2.24%
AmerisourceBergen Corp. 35,000 1,986,950
--------------------------------------------------------------------------
McKesson Corp. 65,000 1,967,550
--------------------------------------------------------------------------
Omnicare, Inc. 25,000 958,500
==========================================================================
4,913,000
==========================================================================
HEALTH CARE EQUIPMENT-2.92%
Apogent Technologies Inc.(a) 50,000 1,097,500
--------------------------------------------------------------------------
Biomet, Inc. 45,000 1,613,700
--------------------------------------------------------------------------
Guidant Corp. 14,000 714,140
--------------------------------------------------------------------------
STERIS Corp.(a) 75,000 1,561,500
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 22,000 1,403,820
==========================================================================
6,390,660
==========================================================================
HEALTH CARE FACILITIES-1.75%
Community Health Systems Inc.(a) 100,000 2,402,000
--------------------------------------------------------------------------
Health Management Associates, Inc.-Class A 30,000 664,500
--------------------------------------------------------------------------
Triad Hospitals, Inc.(a) 25,000 768,250
==========================================================================
3,834,750
==========================================================================
HEALTH CARE SERVICES-2.03%
Caremark Rx, Inc.(a) 25,000 626,250
--------------------------------------------------------------------------
Express Scripts, Inc.(a) 50,000 2,746,000
--------------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 30,000 1,063,500
==========================================================================
4,435,750
==========================================================================
HEALTH CARE SUPPLIES-1.26%
Fisher Scientific International Inc.(a) 40,000 1,610,000
--------------------------------------------------------------------------
Millipore Corp.(a) 26,000 1,140,100
==========================================================================
2,750,100
==========================================================================
HOME ENTERTAINMENT SOFTWARE-0.71%
Electronic Arts Inc.(a) 7,000 693,280
--------------------------------------------------------------------------
Take-Two Interactive Software, Inc.(a) 22,000 870,100
==========================================================================
1,563,380
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOTELS, RESORTS & CRUISE LINES-0.46%
Starwood Hotels & Resorts Worldwide, Inc. 30,000 $ 1,011,900
==========================================================================
HOUSEHOLD APPLIANCES-1.23%
Black & Decker Corp. (The) 35,000 1,673,350
--------------------------------------------------------------------------
Maytag Corp. 40,000 1,016,000
==========================================================================
2,689,350
==========================================================================
INDUSTRIAL GASES-0.31%
Airgas, Inc. 35,000 670,250
==========================================================================
INDUSTRIAL MACHINERY-1.19%
Danaher Corp. 17,000 1,408,450
--------------------------------------------------------------------------
SPX Corp.(a) 25,000 1,203,000
==========================================================================
2,611,450
==========================================================================
INSURANCE BROKERS-1.07%
Willis Group Holdings Ltd. (Bermuda) 70,000 2,331,000
==========================================================================
INTERNET SOFTWARE & SERVICES-1.17%
Netease.com Inc.-ADR (Cayman Islands)(a) 12,000 544,800
--------------------------------------------------------------------------
Sohu.com Inc.(a) 17,000 586,500
--------------------------------------------------------------------------
United Online, Inc.(a) 50,000 1,439,500
==========================================================================
2,570,800
==========================================================================
INVESTMENT BANKING & BROKERAGE-1.19%
Bear Stearns Cos. Inc. (The) 20,000 1,525,000
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 15,000 1,080,000
==========================================================================
2,605,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.41%
Cognizant Technology Solutions Corp.(a) 20,000 907,800
==========================================================================
LEISURE PRODUCTS-1.50%
Hasbro, Inc. 40,000 872,000
--------------------------------------------------------------------------
Leapfrog Enterprises, Inc.-Class A(a) 22,000 760,540
--------------------------------------------------------------------------
Marvel Enterprises, Inc.(a) 56,000 1,649,200
==========================================================================
3,281,740
==========================================================================
MANAGED HEALTH CARE-3.58%
Aetna Inc. 15,000 861,150
--------------------------------------------------------------------------
Anthem, Inc.(a) 58,000 3,968,940
--------------------------------------------------------------------------
CIGNA Corp. 18,000 1,026,900
--------------------------------------------------------------------------
First Health Group Corp.(a) 30,000 732,300
--------------------------------------------------------------------------
WellPoint Health Networks Inc.(a) 14,000 1,244,600
==========================================================================
7,833,890
==========================================================================
MOVIES & ENTERTAINMENT-0.57%
Pixar, Inc.(a) 18,000 1,238,580
==========================================================================
|
FS-184
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MULTI-LINE INSURANCE-0.93%
American Financial Group, Inc. 50,000 $ 1,113,500
--------------------------------------------------------------------------
Unitrin, Inc. 25,000 925,000
==========================================================================
2,038,500
==========================================================================
OFFICE SERVICES & SUPPLIES-0.48%
Avery Dennison Corp. 20,000 1,051,600
==========================================================================
OIL & GAS DRILLING-3.17%
ENSCO International Inc. 80,000 2,108,000
--------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 60,000 2,268,000
--------------------------------------------------------------------------
Patterson-UTI Energy, Inc.(a) 90,000 2,573,100
==========================================================================
6,949,100
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-3.70%
Cooper Cameron Corp.(a) 50,000 2,141,000
--------------------------------------------------------------------------
National-Oilwell, Inc.(a) 83,000 1,582,810
--------------------------------------------------------------------------
Smith International, Inc.(a) 28,000 1,042,440
--------------------------------------------------------------------------
Varco International, Inc.(a) 100,000 1,759,000
--------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 45,000 1,563,750
==========================================================================
8,089,000
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.11%
Devon Energy Corp. 35,000 1,697,500
--------------------------------------------------------------------------
Ultra Petroleum Corp. (Canada)(a) 40,000 732,000
==========================================================================
2,429,500
==========================================================================
PAPER PACKAGING-0.80%
Bemis Co., Inc. 15,000 693,600
--------------------------------------------------------------------------
Sonoco Products Co. 50,000 1,063,500
==========================================================================
1,757,100
==========================================================================
PERSONAL PRODUCTS-0.27%
NBTY, Inc.(a) 22,000 599,500
==========================================================================
PHARMACEUTICALS-4.03%
American Pharmaceutical Partners, Inc.(a) 35,000 852,250
--------------------------------------------------------------------------
Biovail Corp. (Canada)(a) 40,000 962,000
--------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 35,000 1,750,350
--------------------------------------------------------------------------
Medicines Co. (The)(a) 25,000 666,250
--------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 25,000 1,583,750
--------------------------------------------------------------------------
Pharmaceutical Resources, Inc.(a) 13,000 939,640
--------------------------------------------------------------------------
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom)(a) 90,000 2,061,000
==========================================================================
8,815,240
==========================================================================
PUBLISHING-0.53%
Getty Images, Inc.(a) 26,000 1,162,200
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
RAILROADS-0.46%
Norfolk Southern Corp. 50,000 $ 1,007,500
==========================================================================
REINSURANCE-1.68%
Everest Re Group, Ltd. (Bermuda) 20,000 1,659,000
--------------------------------------------------------------------------
PartnerRe Ltd. (Bermuda) 37,000 2,007,990
==========================================================================
3,666,990
==========================================================================
RESTAURANTS-1.43%
Brinker International, Inc.(a) 75,000 2,387,250
--------------------------------------------------------------------------
Darden Restaurants, Inc. 35,000 733,250
==========================================================================
3,120,500
==========================================================================
SEMICONDUCTOR EQUIPMENT-2.87%
Amkor Technology, Inc.(a) 130,000 2,450,500
--------------------------------------------------------------------------
ASML Holding N.V.-New York Shares
(Netherlands)(a) 50,000 877,500
--------------------------------------------------------------------------
Cabot Microelectronics Corp.(a) 25,000 1,425,000
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 37,000 1,527,730
==========================================================================
6,280,730
==========================================================================
SEMICONDUCTORS-4.12%
AMIS Holdings, Inc.(a) 60,000 1,209,000
--------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 20,000 639,000
--------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 60,000 2,632,200
--------------------------------------------------------------------------
Maxim Integrated Products, Inc. 20,000 994,200
--------------------------------------------------------------------------
Microchip Technology Inc. 40,000 1,308,400
--------------------------------------------------------------------------
National Semiconductor Corp.(a) 55,000 2,234,650
==========================================================================
9,017,450
==========================================================================
SOFT DRINKS-0.97%
Coca-Cola Enterprises Inc. 105,000 2,116,800
==========================================================================
SPECIALTY CHEMICALS-0.38%
International Flavors & Fragrances Inc. 25,000 827,500
==========================================================================
SPECIALTY STORES-4.69%
Advance Auto Parts, Inc.(a) 17,000 1,329,740
--------------------------------------------------------------------------
Barnes & Noble, Inc.(a) 55,000 1,639,000
--------------------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 45,000 1,900,800
--------------------------------------------------------------------------
CarMax, Inc.(a) 16,000 504,160
--------------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 80,000 1,216,000
--------------------------------------------------------------------------
Office Depot, Inc.(a) 70,000 1,045,100
--------------------------------------------------------------------------
Staples, Inc.(a) 45,000 1,206,900
--------------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 40,000 1,413,200
==========================================================================
10,254,900
==========================================================================
STEEL-0.53%
Worthington Industries, Inc. 80,000 1,166,400
==========================================================================
SYSTEMS SOFTWARE-0.86%
Computer Associates International, Inc. 80,000 1,881,600
==========================================================================
|
FS-185
MARKET
SHARES VALUE
--------------------------------------------------------------------------
TECHNOLOGY DISTRIBUTORS-0.93%
CDW Corp. 23,000 $ 1,381,150
--------------------------------------------------------------------------
Tech Data Corp.(a) 20,000 658,400
==========================================================================
2,039,550
==========================================================================
THRIFTS & MORTGAGE FINANCE-4.59%
Countrywide Financial Corp. 15,000 1,576,800
--------------------------------------------------------------------------
Doral Financial Corp. (Puerto Rico) 30,000 1,515,000
--------------------------------------------------------------------------
New York Community Bancorp, Inc. 40,000 1,448,000
--------------------------------------------------------------------------
PMI Group, Inc. (The) 47,000 1,796,810
--------------------------------------------------------------------------
Radian Group Inc. 35,000 1,851,500
--------------------------------------------------------------------------
W Holding Co., Inc. (Puerto Rico) 80,000 1,863,200
==========================================================================
10,051,310
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.08%
America Movil S.A. de C.V.-ADR (Mexico) 90,000 2,142,000
--------------------------------------------------------------------------
Nextel Communications, Inc.-Class A(a) 55,000 1,331,000
--------------------------------------------------------------------------
NII Holdings Inc.-Class B(a) 14,000 1,079,260
==========================================================================
4,552,260
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $179,791,474) 209,428,240
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MONEY MARKET FUNDS-5.52%
STIC Liquid Assets Portfolio(b) 6,039,656 $ 6,039,656
--------------------------------------------------------------------------
STIC Prime Portfolio(b) 6,039,656 6,039,656
==========================================================================
Total Money Market Funds (Cost
$12,079,312) 12,079,312
==========================================================================
TOTAL INVESTMENTS-101.20% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $191,870,786) 221,507,552
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.73%
STIC Liquid Assets Portfolio(b)(c) 1,593,500 1,593,500
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $1,593,500) 1,593,500
==========================================================================
TOTAL INVESTMENTS-101.93% (Cost $193,464,286) 223,101,052
==========================================================================
OTHER ASSETS LESS LIABILITIES-(1.93%) (4,215,727)
==========================================================================
NET ASSETS-100.00% $218,885,325
__________________________________________________________________________
==========================================================================
|
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-186
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$179,791,474)* $ 209,428,240
------------------------------------------------------------
Investments in affiliated money market funds
(cost $13,672,812) 13,672,812
------------------------------------------------------------
Receivables for:
Investments sold 9,402,211
------------------------------------------------------------
Fund shares sold 309,270
------------------------------------------------------------
Dividends 22,911
------------------------------------------------------------
Investment for deferred compensation plan 19,504
------------------------------------------------------------
Other assets 40,165
============================================================
Total assets 232,895,113
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 11,831,789
------------------------------------------------------------
Fund shares reacquired 251,231
------------------------------------------------------------
Deferred compensation plan 19,504
------------------------------------------------------------
Collateral upon return of securities loaned 1,593,500
------------------------------------------------------------
Accrued distribution fees 121,224
------------------------------------------------------------
Accrued trustees' fees 4,618
------------------------------------------------------------
Accrued transfer agent fees 94,394
------------------------------------------------------------
Accrued operating expenses 93,528
============================================================
Total liabilities 14,009,788
============================================================
Net assets applicable to shares outstanding $ 218,885,325
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 337,569,760
------------------------------------------------------------
Undistributed net investment income (loss) (24,611)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (148,296,590)
------------------------------------------------------------
Unrealized appreciation of investment
securities 29,636,766
============================================================
$ 218,885,325
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 108,435,889
____________________________________________________________
============================================================
Class B $ 81,297,884
____________________________________________________________
============================================================
Class C $ 28,927,613
____________________________________________________________
============================================================
Class R $ 223,939
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 12,150,266
____________________________________________________________
============================================================
Class B 9,371,414
____________________________________________________________
============================================================
Class C 3,334,190
____________________________________________________________
============================================================
Class R 25,177
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 8.92
------------------------------------------------------------
Offering price per share:
(Net asset value of $8.92 divided by
94.50%) $ 9.44
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.68
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.68
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 8.89
____________________________________________________________
============================================================
|
* At October 31, 2003, securities with an aggregate market value of $1,553,045 were on loan to brokers.
See Notes to Financial Statements.
FS-187
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $1,194) $ 625,148
-------------------------------------------------------------------------
Dividends from affiliated money market funds 161,100
-------------------------------------------------------------------------
Securities lending 12,283
=========================================================================
Total investment income 798,531
=========================================================================
EXPENSES:
Advisory fees 1,343,201
-------------------------------------------------------------------------
Administrative services fees 50,000
-------------------------------------------------------------------------
Custodian fees 54,362
-------------------------------------------------------------------------
Distribution fees:
Class A 283,951
-------------------------------------------------------------------------
Class B 660,267
-------------------------------------------------------------------------
Class C 206,942
-------------------------------------------------------------------------
Class R 252
-------------------------------------------------------------------------
Transfer agent fees 947,519
-------------------------------------------------------------------------
Trustees' fees 11,580
-------------------------------------------------------------------------
Other 201,946
=========================================================================
Total expenses 3,760,020
=========================================================================
Less: Fees waived and expense offset arrangements (5,996)
=========================================================================
Net expenses 3,754,024
=========================================================================
Net investment income (loss) (2,955,493)
=========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment securities 14,307,340
-------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 42,907,455
=========================================================================
Net gain from investment securities 57,214,795
=========================================================================
Net increase in net assets resulting from operations $54,259,302
_________________________________________________________________________
=========================================================================
|
See Notes to Financial Statements.
FS-188
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,955,493) $ (3,709,857)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 14,307,340 (51,459,202)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 42,907,455 6,176,897
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 54,259,302 (48,992,162)
==========================================================================================
Share transactions-net:
Class A 18,339,848 (8,529,105)
------------------------------------------------------------------------------------------
Class B 1,788,121 (2,639,544)
------------------------------------------------------------------------------------------
Class C 5,771,210 (1,653,044)
------------------------------------------------------------------------------------------
Class R 197,900 10,003
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 26,097,079 (12,811,690)
==========================================================================================
Net increase (decrease) in net assets 80,356,381 (61,803,852)
==========================================================================================
NET ASSETS:
Beginning of year 138,528,944 200,332,796
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(24,611) and $(18,569) for 2003 and 2002,
respectively) $218,885,325 $138,528,944
__________________________________________________________________________________________
==========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap 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 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 commercial paper are valued at amortized cost which approximates
FS-189
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 and which are directly attributable to that class are charged to the operations of such class. 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 $1 billion of the Fund's average daily net assets plus 0.75% of the Fund's average daily net assets over $1 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expense offset arrangements, if any) for Class A, Class B, Class C and Class R shares to the extent necessary to limit the total fund operating expenses of Class A shares to 2.00%. Voluntary expense limitations may be modified or discontinued at any time without further notice to investors. 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). For the year ended October 31, 2003, AIM waived fees of $2,625.
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 $50,000 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. During the year ended October 31, 2003, AISI retained $562,458 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 and Class R 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 $283,951, $660,267, $206,942 and $252, 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 $51,252 in front-end sales commissions from the sale of Class A shares and $293, $115, $2,637 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.
FS-190
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 $3,371 under an expense offset arrangement which resulted in a reduction of the Fund's total expenses of $3,371.
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 $2,377 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 $1,553,045 were on loan to brokers. The loans were secured by cash collateral of $1,593,500 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 $12,283 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 $ 28,160,998 ------------------------------------------------------------ Temporary book/tax differences (24,611) ------------------------------------------------------------ Capital loss carryforward (146,820,822) ------------------------------------------------------------ Shares of beneficial interest 337,569,760 ============================================================ Total net assets $ 218,885,325 ____________________________________________________________ ============================================================ |
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
FS-191
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, 2008 $ 9,284,312
----------------------------------------------------------
October 31, 2009 86,724,292
----------------------------------------------------------
October 31, 2010 50,812,218
==========================================================
Total capital loss carryforward $146,820,822
__________________________________________________________
==========================================================
|
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 $355,510,296 and $328,037,408, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $31,518,336
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,357,338)
===========================================================
Net unrealized appreciation of investment
securities $28,160,998
___________________________________________________________
===========================================================
Cost of investments for tax purposes is
$194,940,054.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses on October 31, 2003, undistributed net investment income (loss) was increased by $2,949,451, undistributed net realized gains remained unchanged and shares of beneficial interest decreased by $2,949,451. This reclassification had no effect on net assets of the Fund.
NOTE 10--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A shares, Class B shares, Class C shares and Class R 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 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 7,664,279 $ 58,252,871 8,063,853 $ 72,719,270
----------------------------------------------------------------------------------------------------------------------
Class B 3,281,689 24,068,217 3,669,099 31,692,709
----------------------------------------------------------------------------------------------------------------------
Class C 1,644,878 12,124,964 1,168,577 10,169,033
----------------------------------------------------------------------------------------------------------------------
Class R* 25,518 209,495 1,146 10,003
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 189,563 1,431,485 74,934 635,418
----------------------------------------------------------------------------------------------------------------------
Class B (194,530) (1,431,485) (76,507) (635,418)
======================================================================================================================
Reacquired:
Class A (5,404,259) (41,344,508) (9,446,798) (81,883,793)
----------------------------------------------------------------------------------------------------------------------
Class B (2,879,424) (20,848,611) (4,122,284) (33,696,835)
----------------------------------------------------------------------------------------------------------------------
Class C (872,689) (6,353,754) (1,442,681) (11,822,077)
----------------------------------------------------------------------------------------------------------------------
Class R* (1,487) (11,595) -- --
======================================================================================================================
3,453,538 $ 26,097,079 (2,110,661) $(12,811,690)
______________________________________________________________________________________________________________________
======================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
FS-192
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
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.
CLASS B
------------------------------------------------------------
NOVEMBER 1,
1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------ OCTOBER 31,
2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.40 $ 8.45 $ 14.25 $ 10.00
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.43 (1.87) (5.62) 4.47
==========================================================================================================================
Total from investment operations 2.28 (2.05) (5.80) 4.25
==========================================================================================================================
Net asset value, end of period $ 8.68 $ 6.40 $ 8.45 $ 14.25
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 35.63% (24.26)% (40.70)% 42.50%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $81,298 $58,654 $81,905 $103,893
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 2.55%(c) 2.48% 2.32% 2.32%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (2.07)%(c) (2.14)% (1.73)% (1.45)%(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 $66,026,718.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-193
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------
NOVEMBER 1,
1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------ OCTOBER 31,
2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.40 $ 8.45 $ 14.26 $ 10.00
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.43 (1.87) (5.63) 4.48
==========================================================================================================================
Total from investment operations 2.28 (2.05) (5.81) 4.26
==========================================================================================================================
Net asset value, end of period $ 8.68 $ 6.40 $ 8.45 $ 14.26
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 35.63% (24.26)% (40.74)% 42.60%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,928 $16,404 $23,971 $29,969
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 2.55%(c) 2.48% 2.32% 2.32%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (2.07)%(c) (2.14)% (1.73)% (1.45)%(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 $20,694,220.
(d) Annualized.
(e) 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 $ 6.54 $ 8.73
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a) (0.05)(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.48 (2.14)
=============================================================================================
Total from investment operations 2.35 (2.19)
=============================================================================================
Net asset value, end of period $ 8.89 $ 6.54
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 35.93% (25.09)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 224 $ 7
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 2.05%(c) 1.98%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (1.57)%(c) (1.64)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 211% 185%
_____________________________________________________________________________________________
=============================================================================================
|
(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 $50,310.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-194
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-195
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM U.S. Growth Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM U.S. 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, and the statements of changes in net assets and financial highlights for each of the two 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.
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 U.S. Growth Fund as of October 31, 2003, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two 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-196
AIM U.S. GROWTH FUND
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS--96.27%
AEROSPACE & DEFENSE--1.98%
Lockheed Martin Corp. 240 $ 11,126
--------------------------------------------------------------------------------
Northrop Grumman Corp. 120 10,728
================================================================================
21,854
================================================================================
AIR FREIGHT & LOGISTICS--1.10%
FedEx Corp. 160 12,122
================================================================================
AIRLINES--1.21%
Southwest Airlines Co. 690 13,386
================================================================================
APPAREL RETAIL--0.48%
TJX Cos., Inc. (The) 250 5,247
================================================================================
ASSET MANAGEMENT & CUSTODY BANKS--0.42%
Northern Trust Corp. 100 4,645
================================================================================
BIOTECHNOLOGY--0.95%
Amgen Inc.(a) 170 10,499
================================================================================
COMMUNICATIONS EQUIPMENT--0.58%
Cisco Systems, Inc.(a) 303 6,357
================================================================================
COMPUTER HARDWARE--2.46%
Dell Inc.(a) 750 27,090
================================================================================
CONSUMER FINANCE--1.75%
MBNA Corp. 780 19,305
================================================================================
DATA PROCESSING & OUTSOURCED SERVICES--5.82%
Affiliated Computer Services, Inc.-Class A(a) 580 28,379
--------------------------------------------------------------------------------
Fiserv, Inc.(a) 465 16,424
--------------------------------------------------------------------------------
Paychex, Inc. 210 8,173
--------------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 400 11,220
================================================================================
64,196
================================================================================
DEPARTMENT STORES--1.12%
Kohl's Corp.(a) 221 12,391
================================================================================
DIVERSIFIED BANKS--2.03%
Bank of America Corp. 80 6,058
--------------------------------------------------------------------------------
Wells Fargo & Co. 290 16,333
================================================================================
22,391
================================================================================
DIVERSIFIED CHEMICALS--0.88%
E. I. du Pont de Nemours & Co. 240 9,696
================================================================================
|
FS-197
MARKET
SHARES VALUE
--------------------------------------------------------------------------------
DRUG RETAIL--1.64%
Walgreen Co. 520 $ 18,106
================================================================================
ELECTRIC UTILITIES--1.50%
FPL Group, Inc. 260 16,572
================================================================================
GENERAL MERCHANDISE STORES--0.54%
Target Corp. 150 5,961
================================================================================
HEALTH CARE DISTRIBUTORS--1.75%
Cardinal Health, Inc. 325 19,285
================================================================================
HEALTH CARE EQUIPMENT--2.27%
Biomet, Inc. 380 13,627
--------------------------------------------------------------------------------
Medtronic, Inc. 250 11,393
================================================================================
25,020
================================================================================
HEALTH CARE FACILITIES--0.56%
HCA Inc. 160 6,120
================================================================================
HEALTH CARE SERVICES--2.15%
Express Scripts, Inc.(a) 420 23,066
--------------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 18 598
================================================================================
23,664
================================================================================
HOME ENTERTAINMENT SOFTWARE--0.36%
Electronic Arts Inc.(a) 40 3,962
================================================================================
HOME IMPROVEMENT RETAIL--1.50%
Lowe's Cos., Inc. 280 16,500
================================================================================
HOUSEHOLD PRODUCTS--3.06%
Colgate-Palmolive Co. 320 17,021
--------------------------------------------------------------------------------
Procter & Gamble Co. (The) 170 16,709
================================================================================
33,730
================================================================================
HYPERMARKETS & SUPER CENTERS--2.51%
Wal-Mart Stores, Inc. 470 27,707
================================================================================
INDUSTRIAL CONGLOMERATES--2.75%
3M Co. 60 4,732
--------------------------------------------------------------------------------
General Electric Co. 880 25,529
================================================================================
30,261
================================================================================
INDUSTRIAL GASES--0.62%
Air Products & Chemicals, Inc. 150 6,812
================================================================================
INDUSTRIAL MACHINERY--0.60%
Danaher Corp. 80 6,628
================================================================================
|
FS-198
MARKET
SHARES VALUE
--------------------------------------------------------------------------------
INSURANCE BROKERS--1.20%
Marsh & McLennan Cos., Inc. 310 $ 13,253
================================================================================
INTEGRATED OIL & GAS--3.70%
ChevronTexaco Corp. 130 9,659
--------------------------------------------------------------------------------
Exxon Mobil Corp. 850 31,093
================================================================================
40,752
================================================================================
INTEGRATED TELECOMMUNICATION SERVICES--3.65%
SBC Communications Inc. 1,020 24,460
--------------------------------------------------------------------------------
Verizon Communications Inc. 470 15,792
================================================================================
40,252
================================================================================
LIFE & HEALTH INSURANCE--2.68%
AFLAC Inc. 810 29,549
================================================================================
MANAGED HEALTH CARE--0.83%
UnitedHealth Group Inc. 180 9,158
================================================================================
MOTORCYCLE MANUFACTURERS--1.63%
Harley-Davidson, Inc. 380 18,016
================================================================================
MOVIES & ENTERTAINMENT--1.69%
Viacom Inc.-Class B 190 7,575
--------------------------------------------------------------------------------
Walt Disney Co. (The) 490 11,094
================================================================================
18,669
================================================================================
MULTI-LINE INSURANCE--2.65%
American International Group, Inc. 480 29,198
================================================================================
OIL & GAS DRILLING--0.51%
Nabors Industries, Ltd. (Bermuda)(a) 150 5,670
================================================================================
OIL & GAS EQUIPMENT & SERVICES--0.38%
Weatherford International Ltd. (Bermuda)(a) 120 4,170
================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES--2.28%
Citigroup Inc. 530 25,122
================================================================================
PERSONAL PRODUCTS--0.93%
Gillette Co. (The) 320 10,208
================================================================================
PHARMACEUTICALS--8.89%
Bristol-Myers Squibb Co. 290 7,357
--------------------------------------------------------------------------------
Johnson & Johnson 600 30,198
--------------------------------------------------------------------------------
Lilly (Eli) & Co. 130 8,661
--------------------------------------------------------------------------------
Merck & Co. Inc. 150 6,638
--------------------------------------------------------------------------------
Pfizer Inc. 1,430 45,188
================================================================================
98,042
================================================================================
|
FS-199
MARKET
SHARES VALUE
--------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE--1.90%
Ambac Financial Group, Inc. 150 $ 10,611
--------------------------------------------------------------------------------
Berkshire Hathaway Inc.-Class B(a) 4 10,370
================================================================================
20,981
================================================================================
REGIONAL BANKS--3.86%
Fifth Third Bancorp 300 17,388
--------------------------------------------------------------------------------
Synovus Financial Corp. 910 25,116
================================================================================
42,504
================================================================================
RESTAURANTS--4.29%
Brinker International, Inc.(a) 690 21,963
--------------------------------------------------------------------------------
Starbucks Corp.(a) 240 7,584
--------------------------------------------------------------------------------
Wendy's International, Inc. 480 17,784
================================================================================
47,331
================================================================================
SOFT DRINKS--1.68%
Coca-Cola Co. (The) 400 18,560
================================================================================
SYSTEMS SOFTWARE--3.75%
Microsoft Corp. 1,580 41,317
================================================================================
TECHNOLOGY DISTRIBUTORS--2.07%
CDW Corp. 380 22,819
================================================================================
THRIFTS & MORTGAGE FINANCE--1.76%
Fannie Mae 270 19,356
================================================================================
TOBACCO--2.78%
Altria Group, Inc. 660 30,690
================================================================================
TRADING COMPANIES & DISTRIBUTORS--0.57%
Fastenal Co. 140 6,226
================================================================================
Total Common Stocks (Cost $977,921) 1,061,350
================================================================================
TOTAL INVESTMENTS--96.27% (Cost $977,921) 1,061,350
================================================================================
OTHER ASSETS LESS LIABILITIES--3.73% 41,155
================================================================================
NET ASSETS--100.00% $1,102,505
================================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
See Notes to Financial Statements.
FS-200
AIM U.S. GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2003
ASSETS:
Investments, at market value (cost $977,921) $ 1,061,350
--------------------------------------------------------------------------------
Cash 50,631
--------------------------------------------------------------------------------
Receivables for:
Investments sold 12,161
--------------------------------------------------------------------------------
Dividends 1,630
--------------------------------------------------------------------------------
Amount due from advisor 16,483
--------------------------------------------------------------------------------
Investment for deferred compensation plan 3,462
--------------------------------------------------------------------------------
Other assets 116
================================================================================
Total assets 1,145,833
================================================================================
LIABILITIES:
Payables for:
Investments purchased 16,983
--------------------------------------------------------------------------------
Deferred compensation plan 3,462
--------------------------------------------------------------------------------
Accrued trustees' fees 575
--------------------------------------------------------------------------------
Accrued transfer agent fees 6
--------------------------------------------------------------------------------
Accrued operating expenses 22,302
================================================================================
Total liabilities 43,328
================================================================================
Net assets applicable to shares outstanding $ 1,102,505
================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 997,224
--------------------------------------------------------------------------------
Undistributed net investment income (loss) (18)
--------------------------------------------------------------------------------
Undistributed net realized gain from
investment securities 21,870
--------------------------------------------------------------------------------
Unrealized appreciation of investment
securities 83,429
================================================================================
$ 1,102,505
________________________________________________________________________________
================================================================================
NET ASSETS:
Class A $ 440,999
________________________________________________________________________________
================================================================================
Class B $ 330,753
________________________________________________________________________________
================================================================================
Class C $ 330,753
________________________________________________________________________________
================================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 40,295
________________________________________________________________________________
================================================================================
Class B 30,222
________________________________________________________________________________
================================================================================
Class C 30,222
________________________________________________________________________________
================================================================================
Class A:
Net asset value per share $ 10.94
--------------------------------------------------------------------------------
Offering price per share:
(Net asset value of $10.94 / 94.50%) $ 11.58
________________________________________________________________________________
================================================================================
Class B:
Net asset value and offering price per share $ 10.94
________________________________________________________________________________
================================================================================
Class C:
Net asset value and offering price per share $ 10.94
________________________________________________________________________________
================================================================================
|
See Notes to Financial Statements.
FS-201
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2003
INVESTMENT INCOME:
Dividends $ 15,079
================================================================================
EXPENSES:
Advisory fees 7,519
--------------------------------------------------------------------------------
Administrative services fees 50,000
--------------------------------------------------------------------------------
Custodian fees 1,231
--------------------------------------------------------------------------------
Distribution fees:
Class A 1,403
--------------------------------------------------------------------------------
Class B 3,008
--------------------------------------------------------------------------------
Class C 3,008
--------------------------------------------------------------------------------
Transfer agent fees 77
--------------------------------------------------------------------------------
Trustees' fees 8,828
--------------------------------------------------------------------------------
Professional fees 34,251
--------------------------------------------------------------------------------
Other 6,975
================================================================================
Total expenses 116,300
================================================================================
Less: Fees waived, expenses reimbursed and
expense offset arrangements (98,761)
================================================================================
Net expenses 17,539
================================================================================
Net investment income (loss) (2,460)
================================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment securities 33,177
--------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities 95,453
================================================================================
Net gain from investment securities 128,630
================================================================================
Net increase in net assets resulting from operations $ 126,170
________________________________________________________________________________
================================================================================
|
See Notes to Financial Statements.
FS-202
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 2003 AND THE PERIOD AUGUST 30, 2002 (DATE OPERATIONS COMMENCED) THROUGH OCTOBER 31, 2002.
2003 2002
---------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,460) $ (364)
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 33,177 (11,307)
---------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of investment securities 95,453 (12,024)
===========================================================================================================================
Net increase (decrease) in net assets resulting from operations 126,170 (23,695)
===========================================================================================================================
Distributions to shareholders from net investment income:
Class A (2,800) --
---------------------------------------------------------------------------------------------------------------------------
Class B (2,100) --
---------------------------------------------------------------------------------------------------------------------------
Class C (2,100) --
===========================================================================================================================
Decrease in net assets resulting from distributions (7,000) --
===========================================================================================================================
Share transactions-net:
Class A 2,800 400,010
---------------------------------------------------------------------------------------------------------------------------
Class B 2,100 300,010
---------------------------------------------------------------------------------------------------------------------------
Class C 2,100 300,010
===========================================================================================================================
Net increase in net assets resulting from share transactions 7,000 1,000,030
===========================================================================================================================
Net increase in net assets 126,170 976,335
===========================================================================================================================
NET ASSETS:
Beginning of year 976,335 --
===========================================================================================================================
End of year (including undistributed net investment income (loss) of
$(18) and $6,561 for 2003 and 2002, respectively $ 1,102,505 $ 976,335
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
See Notes to Financial Statements.
FS-203
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
AIM U.S. 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 consists of multiple classes of shares. 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 is currently closed to new investors.
The Fund's investment objective is to provide 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 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.
FS-204
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 and which are directly attributable to that class are charged to the operations of such class. 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 $1 billion of the Fund's average daily net assets, plus 0.70% of the Fund's next $1 billion of average daily net assets, plus 0.65% of the Fund's average daily net assets in excess of $2 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding interest, taxes, fund merger and reorganization expenses, extraordinary items and increases in expenses due to expense offset arrangements, if any) for Class A, Class B and Class C shares to the extent necessary to limit the total annual fund operating expenses of Class A, Class B and Class C shares to 1.75%. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. 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. For the year ended October 31, 2003, AIM waived fees of $7,519 and reimbursed expenses of $82,945.
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 $50,000 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $44 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, AIM Distributors may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own 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 amount of sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. AIM Distributors has voluntarily agreed to waive all fees during the time the shares are not available for sale. Voluntary fee waivers may be modified or discontinued at any time. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B and Class C shares paid $0, $0 and $0, respectively after AIM Distributors waived plan fees of $1,403, $3,008 and $3,008, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
FS-205
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 $11 and reductions in custodian fees of $867 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $878.
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 $2,189 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 year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving 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 -- DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
The tax character of distributions paid during the year ended October 31, 2003 and the period August 30, 2002 (date operations commenced) through October 31, 2002 was as follows:
2003 2002
--------------------------------------------------------------------------------
Distributions paid from ordinary income $ 7,000 $ --
|
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 $ 25,830 ---------------------------------------------------------------- Unrealized appreciation - investments 83,243 ---------------------------------------------------------------- Temporary book/tax differences (3,792) ---------------------------------------------------------------- Shares of beneficial interest 997,224 ---------------------------------------------------------------- Total net assets $ 1,102,505 ================================================================ |
FS-206
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.
NOTE 7 -- 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 $379,065 and $405,462, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 108,470
----------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (25,227)
================================================================
Net unrealized appreciation of investment
securities $ 83,243
________________________________________________________________
================================================================
Cost of investments for tax purposes is $978,107.
|
NOTE 8 -- RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of stock issuance cost and non-deductible excise taxes, on October 31, 2003, undistributed net investment income was increased by $2,881 and the shares of beneficial interest decreased by $2,881. This reclassification had no effect on the net assets of the Fund.
NOTE 9 -- SHARE INFORMATION
The Fund currently consists of three different classes of shares that are not available for sale: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
----------------------------------------------------------------------------------------------------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, 2003 OCTOBER 31, 2002
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A* -- $ -- 40,001 $ 400,010
----------------------------------------------------------------------------------------------------------------------
Class B* -- -- 30,001 300,010
----------------------------------------------------------------------------------------------------------------------
Class C* -- -- 30,001 300,010
======================================================================================================================
Issued as reinvestment of dividends:
Class A* 294 2,800 -- --
----------------------------------------------------------------------------------------------------------------------
Class B* 221 2,100 -- --
----------------------------------------------------------------------------------------------------------------------
Class C* 221 2,100 -- --
======================================================================================================================
736 $ 7,000 100,003 $1,000,030
______________________________________________________________________________________________________________________
======================================================================================================================
|
* Currently, the fund is not open to investors and consequently all shares are owned by AIM.
FS-207
NOTE 10 -- FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding during the year ended October 31, 2003 and the period August 30, 2002 (date operations commenced) to October 31, 2002.
CLASS A
------------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.76 $ 10.00
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) 0.00
-----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.27 (0.24)
===========================================================================================================
Total from investment operations 1.25 (0.24)
===========================================================================================================
Less dividends from net investment income (0.07) --
===========================================================================================================
Net asset value, end of period $ 10.94 $ 9.76
___________________________________________________________________________________________________________
===========================================================================================================
Total return(a) 12.92% (2.40)%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 441 $ 391
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.84%(b) 1.76%(c)
-----------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 11.21%(b) 22.45%(c)
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of net investment income (loss) to average net assets (0.25)%(b) (0.22)%(c)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(d) 39% 1%
___________________________________________________________________________________________________________
===========================================================================================================
|
(a) 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.
(b) Ratios are based on average daily net assets of $401,019.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-208
NOTE 10 -- FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.76 $ 10.00
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.00)
------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.27 (0.24)
======================================================================================================
Total from investment operations 1.25 (0.24)
======================================================================================================
Less dividends from net investment income (0.07) --
======================================================================================================
Net asset value, end of period $ 10.94 $ 9.76
______________________________________________________________________________________________________
======================================================================================================
Total return(a) 12.92% (2.40)%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 331 $ 293
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.84%(b) 1.76%(c)
------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 11.86%(b) 23.10%(c)
______________________________________________________________________________________________________
======================================================================================================
Ratio of net investment income (loss) to average net assets (0.25)%(b) (0.22)%(c)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(d) 39% 1%
______________________________________________________________________________________________________
======================================================================================================
|
(a) 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.
(b) Ratios are based on average daily net assets of $300,767.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-209
NOTE 10 -- FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2003 2002
---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.76 $ 10.00
---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.00)
---------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.27 (0.24)
===================================================================================================
Total from investment operations 1.25 (0.24)
===================================================================================================
Less dividends from net investment income (0.07) --
===================================================================================================
Net asset value, end of period $ 10.94 $ 9.76
___________________________________________________________________________________________________
===================================================================================================
Total return(a) 12.92% (2.40)%
___________________________________________________________________________________________________
===================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 331 $ 293
___________________________________________________________________________________________________
===================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.84%(b) 1.76%(c)
---------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 11.86%(b) 23.10%(c)
___________________________________________________________________________________________________
===================================================================================================
Ratio of net investment income (loss) to average net assets (0.25)%(b) (0.22)%(c)
___________________________________________________________________________________________________
===================================================================================================
Portfolio turnover rate(d) 39% 1%
___________________________________________________________________________________________________
===================================================================================================
|
(a) 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.
(b) Ratios are based on average daily net assets of $300,767.
(c) Annualized.
(d) Not annualized for periods less than one year.
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 alleged illegal activities; civil 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.
FS-210
NOTE 11 -- SUBSEQUENT EVENTS (CONTINUED)
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, 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 to seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunction
relief; disgorgement; equitable relief; interest and the payment of attorneys'
fees 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.
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-211
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-212
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-213
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-214
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-215
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-216
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-217
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-218
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-219
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-220
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-221
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-222
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-223
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-224
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-225
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-226
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS-98.26%
ADVERTISING-2.33%
Lamar Advertising Co.(a)(b) 500,000 $ 20,530,000
---------------------------------------------------------------------------
Omnicom Group Inc. 400,000 31,804,000
===========================================================================
52,334,000
===========================================================================
AEROSPACE & DEFENSE-1.17%
Engineered Support Systems, Inc. 350,000 17,020,500
---------------------------------------------------------------------------
L-3 Communications Holdings, Inc. 150,000 9,261,000
===========================================================================
26,281,500
===========================================================================
AIR FREIGHT & LOGISTICS-1.81%
Expeditors International of Washington, Inc. 500,000 20,095,000
---------------------------------------------------------------------------
Robinson (C.H.) Worldwide, Inc. 500,000 20,520,000
===========================================================================
40,615,000
===========================================================================
APPAREL RETAIL-3.24%
Aeropostale, Inc.(a) 600,000 13,194,000
---------------------------------------------------------------------------
Chico's FAS, Inc.(a)(b) 250,000 10,182,500
---------------------------------------------------------------------------
Foot Locker, Inc. 500,000 12,000,000
---------------------------------------------------------------------------
Hot Topic, Inc.(a) 625,000 13,912,500
---------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a)(b) 500,000 12,745,000
---------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 500,000 10,735,000
===========================================================================
72,769,000
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.47%
Coach, Inc.(a) 250,000 10,650,000
===========================================================================
APPLICATION SOFTWARE-2.32%
Citrix Systems, Inc.(a) 750,000 14,287,500
---------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 550,000 17,341,500
---------------------------------------------------------------------------
Fair Issac Corp. 300,000 10,116,000
---------------------------------------------------------------------------
Siebel Systems, Inc.(a) 1,000,000 10,280,000
===========================================================================
52,025,000
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-4.96%
Affiliated Managers Group, Inc.(a)(b) 300,000 14,610,000
---------------------------------------------------------------------------
Investors Financial Services Corp. 1,250,000 48,587,500
---------------------------------------------------------------------------
Legg Mason, Inc. 300,000 27,618,000
---------------------------------------------------------------------------
T. Rowe Price Group Inc. 400,000 20,512,000
===========================================================================
111,327,500
===========================================================================
AUTO PARTS & EQUIPMENT-0.71%
Gentex Corp. 250,000 9,832,500
---------------------------------------------------------------------------
Lear Corp. 100,000 6,062,000
===========================================================================
15,894,500
===========================================================================
BIOTECHNOLOGY-0.82%
Invitrogen Corp.(a) 150,000 10,834,500
---------------------------------------------------------------------------
|
---------------------------------------------------------------------------
MARKET
SHARES VALUE
BIOTECHNOLOGY-(CONTINUED)
NPS Pharmaceuticals, Inc.(a) 300,000 $ 7,515,000
===========================================================================
18,349,500
===========================================================================
BROADCASTING & CABLE TV-2.76%
Citadel Broadcasting Co.(a) 1,000,000 17,350,000
---------------------------------------------------------------------------
Entercom Communications Corp.(a) 350,000 15,960,000
---------------------------------------------------------------------------
Univision Communications Inc.-Class A(a)(b) 850,000 28,772,500
===========================================================================
62,082,500
===========================================================================
CASINOS & GAMING-0.28%
Alliance Gaming Corp.(a) 250,000 6,242,500
===========================================================================
COMMUNICATIONS EQUIPMENT-3.89%
Avaya Inc.(a) 400,000 5,472,000
---------------------------------------------------------------------------
Avocent Corp.(a) 350,000 11,231,500
---------------------------------------------------------------------------
Comverse Technology, Inc.(a)(b) 2,000,000 32,720,000
---------------------------------------------------------------------------
Plantronics, Inc.(a) 528,600 20,060,370
---------------------------------------------------------------------------
Polycom, Inc.(a) 500,000 9,540,000
---------------------------------------------------------------------------
Tekelec(a) 500,000 8,335,000
===========================================================================
87,358,870
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.97%
Best Buy Co., Inc. 400,000 21,700,000
===========================================================================
COMPUTER STORAGE & PERIPHERALS-0.57%
Electronics for Imaging, Inc.(a)(b) 500,000 12,690,000
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.49%
Deere & Co. 300,000 20,412,000
---------------------------------------------------------------------------
Joy Global Inc. 500,000 13,125,000
===========================================================================
33,537,000
===========================================================================
CONSUMER ELECTRONICS-0.25%
Harman International Industries, Inc. 75,000 5,688,750
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-6.45%
Alliance Data Systems Corp.(a) 1,500,000 52,155,000
---------------------------------------------------------------------------
CheckFree Corp.(a)(b) 500,000 15,020,000
---------------------------------------------------------------------------
Euronet Worldwide, Inc.(a)(b) 500,000 9,715,000
---------------------------------------------------------------------------
Fiserv, Inc.(a) 517,500 18,919,800
---------------------------------------------------------------------------
Iron Mountain Inc.(a)(b) 250,000 11,377,500
---------------------------------------------------------------------------
Paychex, Inc. 400,000 14,912,000
---------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 875,000 22,811,250
===========================================================================
144,910,550
===========================================================================
|
FS-227
MARKET
SHARES VALUE
---------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-5.80%
Apollo Group, Inc.-Class A(a) 500,000 $ 45,440,000
---------------------------------------------------------------------------
Cintas Corp.(b) 575,000 25,852,000
---------------------------------------------------------------------------
Corporate Executive Board Co. (The) 500,000 25,825,000
---------------------------------------------------------------------------
CoStar Group Inc.(a) 400,000 15,772,000
---------------------------------------------------------------------------
University of Phoenix Online(a) 200,000 17,412,000
===========================================================================
130,301,000
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.02%
Rockwell Automation, Inc. 700,000 22,883,000
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.76%
Agilent Technologies, Inc.(a) 550,000 14,855,500
---------------------------------------------------------------------------
Littelfuse, Inc.(a) 200,000 7,680,000
---------------------------------------------------------------------------
National Instruments Corp.(b) 375,000 11,460,000
---------------------------------------------------------------------------
Tektronix, Inc. 400,000 11,840,000
---------------------------------------------------------------------------
Waters Corp.(a)(b) 375,000 16,181,250
===========================================================================
62,016,750
===========================================================================
EMPLOYMENT SERVICES-1.94%
Robert Half International Inc.(a)(b) 1,600,000 43,632,000
===========================================================================
GENERAL MERCHANDISE STORES-0.12%
Fred's, Inc. 150,000 2,785,500
===========================================================================
HEALTH CARE DISTRIBUTORS-1.47%
Henry Schein, Inc.(a)(b) 175,000 12,332,250
---------------------------------------------------------------------------
Omnicare, Inc.(b) 500,000 20,740,000
===========================================================================
33,072,250
===========================================================================
HEALTH CARE EQUIPMENT-3.75%
ResMed Inc.(a)(b) 500,000 24,640,000
---------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 300,000 22,878,000
---------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 150,000 12,876,000
---------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 300,000 23,955,000
===========================================================================
84,349,000
===========================================================================
HEALTH CARE FACILITIES-1.12%
Health Management Associates, Inc.-Class A(b) 500,000 11,565,000
---------------------------------------------------------------------------
Triad Hospitals, Inc.(a) 400,000 13,604,000
===========================================================================
25,169,000
===========================================================================
HEALTH CARE SERVICES-1.92%
Caremark Rx, Inc.(a) 1,050,000 35,542,500
---------------------------------------------------------------------------
VistaCare, Inc.-Class A(a) 300,000 7,557,000
===========================================================================
43,099,500
===========================================================================
HEALTH CARE SUPPLIES-2.10%
Cooper Cos., Inc. (The)(b) 225,000 12,150,000
---------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(b) 600,000 35,130,000
===========================================================================
47,280,000
===========================================================================
|
---------------------------------------------------------------------------
MARKET
SHARES VALUE
INDUSTRIAL CONGLOMERATES-0.43%
Textron Inc. 175,000 $ 9,656,500
===========================================================================
INDUSTRIAL MACHINERY-2.97%
Danaher Corp. 400,000 37,008,000
---------------------------------------------------------------------------
Eaton Corp. 500,000 29,690,000
===========================================================================
66,698,000
===========================================================================
INTERNET SOFTWARE & SERVICES-0.55%
United Online, Inc.(a)(b) 750,000 12,450,000
===========================================================================
INVESTMENT BANKING & BROKERAGE-1.39%
Edwards (A.G.), Inc. 150,000 5,488,500
---------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 350,000 25,690,000
===========================================================================
31,178,500
===========================================================================
IT CONSULTING & OTHER SERVICES-1.63%
Acxiom Corp. 600,000 13,884,000
---------------------------------------------------------------------------
CACI International Inc.-Class A(a) 500,000 22,750,000
===========================================================================
36,634,000
===========================================================================
LEISURE PRODUCTS-0.55%
Brunswick Corp. 300,000 12,333,000
===========================================================================
MANAGED HEALTH CARE-0.34%
Health Net Inc.(a) 300,000 7,632,000
===========================================================================
MULTI-LINE INSURANCE-0.29%
HCC Insurance Holdings, Inc. 200,000 6,404,000
===========================================================================
PHARMACEUTICALS-2.37%
Barr Pharmaceuticals Inc.(a) 300,000 12,426,000
---------------------------------------------------------------------------
IVAX Corp.(a) 300,000 6,390,000
---------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 400,000 17,168,000
---------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a)(b) 400,000 17,300,000
===========================================================================
53,284,000
===========================================================================
PUBLISHING-1.75%
Belo Corp.-Class A 425,000 12,095,500
---------------------------------------------------------------------------
Getty Images, Inc.(a)(b) 500,000 27,300,000
===========================================================================
39,395,500
===========================================================================
REGIONAL BANKS-0.92%
Commerce Bancorp, Inc.(b) 150,000 8,551,500
---------------------------------------------------------------------------
Southwest Bancorp. of Texas, Inc. 300,000 12,201,000
===========================================================================
20,752,500
===========================================================================
RESTAURANTS-0.65%
Krispy Kreme Doughnuts, Inc.(a)(b) 450,000 14,629,500
===========================================================================
SEMICONDUCTOR EQUIPMENT-1.52%
MEMC Electronic Materials, Inc.(a) 2,000,000 15,940,000
---------------------------------------------------------------------------
Novellus Systems, Inc.(a) 625,000 18,100,000
===========================================================================
34,040,000
===========================================================================
|
FS-228
MARKET
SHARES VALUE
---------------------------------------------------------------------------
SEMICONDUCTORS-11.11%
Altera Corp.(a) 1,250,000 $ 25,012,500
---------------------------------------------------------------------------
AMIS Holdings, Inc.(a) 1,250,000 18,026,250
---------------------------------------------------------------------------
Analog Devices, Inc. 650,000 27,690,000
---------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 350,000 13,216,000
---------------------------------------------------------------------------
Fairchild Semiconductor International,
Inc.(a) 400,000 7,788,000
---------------------------------------------------------------------------
Intersil Corp.-Class A 750,000 14,812,500
---------------------------------------------------------------------------
Linear Technology Corp. 650,000 23,159,500
---------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a)(b) 575,000 22,269,750
---------------------------------------------------------------------------
Maxim Integrated Products, Inc. 1,000,000 45,990,000
---------------------------------------------------------------------------
Microchip Technology Inc.(b) 1,250,000 35,025,000
---------------------------------------------------------------------------
OmniVision Technologies, Inc.(a)(b) 750,000 16,726,500
===========================================================================
249,716,000
===========================================================================
SPECIALIZED FINANCE-0.50%
Moody's Corp. 175,000 11,289,250
===========================================================================
SPECIALTY CHEMICALS-0.44%
Valspar Corp. (The) 200,000 9,930,000
===========================================================================
SPECIALTY STORES-7.00%
Pep Boys (The)-Manny, Moe & Jack 275,000 7,554,250
---------------------------------------------------------------------------
PETCO Animal Supplies, Inc.(a) 350,000 10,276,000
---------------------------------------------------------------------------
Regis Corp. 303,000 13,156,260
---------------------------------------------------------------------------
Staples, Inc. 1,750,000 45,080,000
---------------------------------------------------------------------------
Tiffany & Co. 500,000 19,500,000
---------------------------------------------------------------------------
Tractor Supply Co.(a) 750,000 29,295,000
---------------------------------------------------------------------------
Williams-Sonoma, Inc.(a)(b) 1,000,000 32,480,000
===========================================================================
157,341,510
===========================================================================
SYSTEMS SOFTWARE-2.51%
Accelr8 Technology Corp.(a) 29,424 75,620
---------------------------------------------------------------------------
Adobe Systems Inc. 350,000 14,469,000
---------------------------------------------------------------------------
BMC Software, Inc.(a) 1,000,000 17,300,000
---------------------------------------------------------------------------
Network Associates, Inc.(a) 500,000 7,840,000
---------------------------------------------------------------------------
VERITAS Software Corp.(a) 625,000 16,668,750
===========================================================================
56,353,370
===========================================================================
|
---------------------------------------------------------------------------
MARKET
SHARES VALUE
TECHNOLOGY DISTRIBUTORS-1.81%
CDW Corp.(b) 650,000 $ 40,618,500
===========================================================================
THRIFTS & MORTGAGE FINANCE-0.84%
New York Community Bancorp, Inc.(b) 750,000 18,802,500
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-1.77%
Fastenal Co.(b) 400,000 21,948,000
---------------------------------------------------------------------------
MSC Industrial Direct Co., Inc.-Class A 625,000 17,912,500
===========================================================================
39,860,500
===========================================================================
TRUCKING-0.43%
Sirva Inc.(a) 419,800 9,751,954
===========================================================================
Total Common Stocks (Cost $1,829,739,865) 2,207,795,254
===========================================================================
MONEY MARKET FUNDS-1.89%
Liquid Assets Portfolio-Institutional
Class(c) 21,226,008 21,226,008
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 21,226,008 21,226,008
===========================================================================
Total Money Market Funds (Cost
$42,452,016) 42,452,016
===========================================================================
TOTAL INVESTMENTS-100.15% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,872,191,881) 2,250,247,270
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-13.86%
Liquid Assets Portfolio-Institutional
Class(c)(d) 155,673,947 155,673,947
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(c)(d) 155,673,947 155,673,947
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $311,347,894) 311,347,894
===========================================================================
TOTAL INVESTMENTS-114.01% (Cost
$2,183,539,775) 2,561,595,164
===========================================================================
OTHER ASSETS LESS LIABILITIES-(14.01%) (314,815,761)
===========================================================================
NET ASSETS-100.00% $2,246,779,403
___________________________________________________________________________
===========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-229
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,829,739,865)* $2,207,795,254
------------------------------------------------------------
Investments in affiliated money market funds
(cost $353,799,910) 353,799,910
============================================================
Total investments (cost $2,183,539,775) 2,561,595,164
============================================================
Cash 4,159,052
------------------------------------------------------------
Receivables for:
Investments sold 73,930,832
------------------------------------------------------------
Fund shares sold 2,973,096
------------------------------------------------------------
Dividends 823,273
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 146,162
------------------------------------------------------------
Other assets 58,119
============================================================
Total assets 2,643,685,698
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 77,482,754
------------------------------------------------------------
Fund shares reacquired 5,303,470
------------------------------------------------------------
Deferred compensation and retirement plans 270,936
------------------------------------------------------------
Collateral upon return of securities
loaned 311,347,894
------------------------------------------------------------
Accrued distribution fees 689,249
------------------------------------------------------------
Accrued trustees' fees 2,187
------------------------------------------------------------
Accrued transfer agent fees 1,513,213
------------------------------------------------------------
Accrued operating expenses 296,592
============================================================
Total liabilities 396,906,295
============================================================
Net assets applicable to shares outstanding $2,246,779,403
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,636,780,950
------------------------------------------------------------
Undistributed net investment income (loss) (11,767,253)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (756,289,683)
------------------------------------------------------------
Unrealized appreciation of investment
securities 378,055,389
============================================================
$2,246,779,403
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,907,153,851
____________________________________________________________
============================================================
Class B $ 261,231,195
____________________________________________________________
============================================================
Class C $ 75,962,271
____________________________________________________________
============================================================
Class R $ 2,308,403
____________________________________________________________
============================================================
Institutional Class $ 123,683
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 202,987,140
____________________________________________________________
============================================================
Class B 29,123,213
____________________________________________________________
============================================================
Class C 8,469,846
____________________________________________________________
============================================================
Class R 247,027
____________________________________________________________
============================================================
Institutional Class 13,007
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.40
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.40 divided by
94.50%) $ 9.95
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.97
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.97
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.34
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.51
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $302,318,935 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-230
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,050) $ 4,104,039
---------------------------------------------------------------------------
Dividends from affiliated money market funds* 522,631
===========================================================================
Total investment income 4,626,670
===========================================================================
EXPENSES:
Advisory fees 7,443,340
---------------------------------------------------------------------------
Administrative services fees 246,587
---------------------------------------------------------------------------
Custodian fees 161,057
---------------------------------------------------------------------------
Distribution fees:
Class A 2,484,018
---------------------------------------------------------------------------
Class B 1,341,157
---------------------------------------------------------------------------
Class C 401,439
---------------------------------------------------------------------------
Class R 4,864
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 3,533,241
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 48
---------------------------------------------------------------------------
Trustees' fees 21,218
---------------------------------------------------------------------------
Other 546,886
===========================================================================
Total expenses 16,183,855
===========================================================================
Less: Fees waived and expense offset arrangements (25,273)
===========================================================================
Net expenses 16,158,582
===========================================================================
Net investment income (loss) (11,531,912)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 291,563,155
===========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (176,648,766)
===========================================================================
Net gain from investment securities 114,914,389
===========================================================================
Net increase in net assets resulting from operations $ 103,382,477
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-231
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (11,531,912) $ (22,556,283)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities 291,563,155 61,969,001
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (176,648,766) 408,592,565
==============================================================================================
Net increase in net assets resulting from operations 103,382,477 448,005,283
==============================================================================================
Share transactions-net:
Class A (165,334,215) (198,927,862)
----------------------------------------------------------------------------------------------
Class B (11,667,860) (13,011,938)
----------------------------------------------------------------------------------------------
Class C (8,490,763) (6,417,966)
----------------------------------------------------------------------------------------------
Class R 1,091,309 879,113
----------------------------------------------------------------------------------------------
Institutional Class (2,732,114) 1,928,983
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (187,133,643) (215,549,670)
==============================================================================================
Net increase (decrease) in net assets (83,751,166) 232,455,613
==============================================================================================
NET ASSETS:
Beginning of period 2,330,530,569 2,098,074,956
==============================================================================================
End of period (including undistributed net investment income
(loss) of $11,767,253) and $(235,341) for 2004 and 2003,
respectively) $2,246,779,403 $2,330,530,569
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-232
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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
FS-233
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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 FEES PAID TO 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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $6,365.
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 six months ended April 30, 2004, AIM was paid $246,587 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 six months ended April 30, 2004, AISI retained $1,321,264 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 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $2,484,018, $1,341,157, $401,439 and $4,864, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $136,554 in front-end sales commissions from the sale of Class A shares and $5,065, $4,168, $5,166 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.
FS-234
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
--------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio --
Institutional
Class $ 37,783,111 $238,832,864 $ (255,389,967) $ -- $ 21,226,008 $104,179 $ --
--------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio --
Institutional
Class 37,783,111 238,832,864 (255,389,967) -- 21,226,008 102,114 --
================================================================================================================================
Subtotal $ 75,566,222 $477,665,728 $ (510,779,934) $ -- $ 42,452,016 $206,293 $ --
________________________________________________________________________________________________________________________________
================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND* REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
--------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio --
Institutional
Class $261,330,936 $189,059,157 $ (294,716,146) $ -- $155,673,947 $156,586 $ --
--------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio --
Institutional
Class 261,330,936 189,059,157 (294,716,146) -- 155,673,947 159,752 --
--------------------------------------------------------------------------------------------------------------------------------
Subtotal $522,661,872 $378,118,314 $ (589,432,292) $ -- $311,347,894 $316,338 $ --
================================================================================================================================
Total $598,228,094 $855,784,042 $(1,100,212,226) $ -- $353,799,910 $522,631 $ --
________________________________________________________________________________________________________________________________
================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $1,913,225.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $17,904 and reductions in custodian fees of $1,004 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $18,908.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $6,183 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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
FS-235
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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $302,318,935 were on loan to brokers. The loans were secured by cash collateral of $311,347,894 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $316,338 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 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
__________________________________________________________
==========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
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 six months ended April 30, 2004 was $1,395,700,285 and $1,581,801,741, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $432,123,568
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (61,537,667)
===========================================================
Net unrealized appreciation of investment
securities $370,585,901
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $2,191,009,263.
|
FS-236
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
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 11,989,398 $ 113,278,177 35,791,336 $ 277,895,468
--------------------------------------------------------------------------------------------------------------------------
Class B 1,655,981 14,957,998 4,508,173 33,128,293
--------------------------------------------------------------------------------------------------------------------------
Class C 894,910 8,079,941 2,072,120 15,430,661
--------------------------------------------------------------------------------------------------------------------------
Class R 147,885 1,382,192 162,296 1,283,289
--------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 275,456 2,002,058
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 209,512 2,003,739 337,998 2,617,107
--------------------------------------------------------------------------------------------------------------------------
Class B (219,192) (2,003,739) (351,540) (2,617,107)
==========================================================================================================================
Reacquired:
Class A (29,747,498) (280,616,131) (62,095,032) (479,440,437)
--------------------------------------------------------------------------------------------------------------------------
Class B (2,722,239) (24,622,119) (5,947,043) (43,523,124)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,833,957) (16,570,704) (2,982,429) (21,848,627)
--------------------------------------------------------------------------------------------------------------------------
Class R (30,811) (290,883) (51,154) (404,176)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (272,203) (2,732,114) (9,111) (73,075)
==========================================================================================================================
(19,928,214) $(187,133,643) (28,288,930) $(215,549,670)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
FS-237
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90 $ 10.04
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.07)(a) (0.09)(a) (0.09)(a) (0.13) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.45 1.76 (1.29) (6.34) 11.08 4.05
=================================================================================================================================
Total from investment operations 0.41 1.69 (1.38) (6.43) 10.95 3.96
=================================================================================================================================
Less distributions from net realized
gains -- -- -- (3.30) (6.44) (0.10)
=================================================================================================================================
Net asset value, end of period $ 9.40 $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 4.56% 23.15% (15.90)% (40.51)% 47.53% 39.73%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,907,154 $1,983,600 $1,798,318 $2,516,407 $4,444,515 $2,808,451
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.27%(c) 1.30% 1.32% 1.17% 1.04% 1.09%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (0.87)%(c) (0.96)% (1.00)% (0.79)% (0.77)% (0.69)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 61% 78% 68% 89% 79% 75%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based on upon
those net asset values may differ from the net asset value and returns
for shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,998,133,239.
(d) Not annualized for periods less than one year.
CLASS B
------------------------------------------------------------------------------------------
MARCH 1, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81 $ 10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29) (0.07)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.42 1.71 (1.26) (6.20) 11.04 3.03
=================================================================================================================================
Total from investment operations 0.35 1.58 (1.41) (6.37) 10.75 2.96
=================================================================================================================================
Less distributions from net realized
gains -- -- -- (3.30) (6.44) --
=================================================================================================================================
Net asset value, end of period $ 8.97 $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 4.06% 22.44% (16.69)% (40.90)% 46.29% 27.27%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $261,231 $262,098 $226,806 $294,303 $374,010 $24,914
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 2.02%(c) 2.05% 2.07% 1.94% 1.86% 2.08%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.62)%(c) (1.71)% (1.75)% (1.55)% (1.59)% (1.68)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 61% 78% 68% 89% 79% 75%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$269,705,079.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-238
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------------------------------
MARCH 1, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, -------------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.04 $ 8.45 $ 18.11 $ 13.81 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29) (0.07)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.42 1.71 (1.26) (6.19) 11.03 3.03
=================================================================================================================================
Total from investment operations 0.35 1.58 (1.41) (6.36) 10.74 2.96
=================================================================================================================================
Less distributions from net realized gains -- -- -- (3.30) (6.44) --
=================================================================================================================================
Net asset value, end of period $ 8.97 $ 8.62 $ 7.04 $ 8.45 $ 18.11 $13.81
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 4.06% 22.44% (16.69)% (40.86)% 46.21% 27.27%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $75,962 $81,079 $72,676 $96,640 $120,591 $6,807
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.02%(c) 2.05% 2.07% 1.94% 1.86% 2.08%(d)
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.62)%(c) (1.71)% (1.75)% (1.55)% (1.59)% (1.68)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 61% 78% 68% 89% 79% 75%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$80,728,865.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS R
--------------------------------------------
JUNE 3, 2002
(DATE SALES
SIX MONTHS COMMENCED)
ENDED YEAR ENDED TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.96 $ 7.29 $ 8.89
----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.10)(a) (0.04)(a)
----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.43 1.77 (1.56)
==========================================================================================================
Total from investment operations 0.38 1.67 (1.60)
==========================================================================================================
Net asset value, end of period $ 9.34 $ 8.96 $ 7.29
__________________________________________________________________________________________________________
==========================================================================================================
Total return(b) 4.24% 22.91% (18.00)%
__________________________________________________________________________________________________________
==========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,308 $1,164 $ 137
__________________________________________________________________________________________________________
==========================================================================================================
Ratio of expenses to average net assets 1.52%(c) 1.55% 1.62%(d)
==========================================================================================================
Ratio of net investment income (loss) to average net assets (1.12)%(c) (1.21)% (1.30)%(d)
__________________________________________________________________________________________________________
==========================================================================================================
Portfolio turnover rate(e) 61% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$1,956,365.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-239
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
----------------------------------------------
MARCH 15, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.08 $ 7.32 $ 9.53
------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.03)(a) (0.02)(a)
------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.45 1.79 (2.19)
============================================================================================================
Total from investment operations 0.43 1.76 (2.21)
============================================================================================================
Net asset value, end of period $ 9.51 $ 9.08 $ 7.32
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 4.74% 24.04% (23.19)%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 124 $2,589 $ 138
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets 0.72%(c) 0.71% 0.81%(d)
============================================================================================================
Ratio of net investment income (loss) to average net assets (0.32)%(c) (0.37)% (0.49)%(d)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate(e) 61% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$2,432,473.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's
FS-240
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $86,093 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
FS-241
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-242
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------------------------
COMMON STOCKS--97.11%
ADVERTISING--5.73%
Interpublic Group of Cos., Inc. (The)(a) 2,500 $ 39,225
--------------------------------------------------------------------------------------------
Omnicom Group Inc. 450 35,779
============================================================================================
75,004
============================================================================================
AEROSPACE & DEFENSE--1.85%
Honeywell International Inc. 700 24,206
============================================================================================
APPAREL RETAIL--2.69%
Gap, Inc. (The) 1,600 35,216
--------------------------------------------------------------------------------------------
BUILDING PRODUCTS--2.01%
American Standard Cos. Inc.(a) 250 26,297
--------------------------------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES--6.10%
Ceridian Corp.(a) 1,400 29,932
--------------------------------------------------------------------------------------------
First Data Corp. 1,100 49,929
============================================================================================
79,861
============================================================================================
DIVERSIFIED BANKS--1.36%
Bank One Corp. 360 17,773
============================================================================================
DIVERSIFIED CAPITAL MARKETS--2.01%
J.P. Morgan Chase & Co. 700 26,320
============================================================================================
DIVERSIFIED COMMERCIAL SERVICES--4.82%
Cendant Corp. 2,000 47,360
--------------------------------------------------------------------------------------------
H&R Block, Inc. 350 15,788
============================================================================================
63,148
============================================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS--3.62%
Waters Corp.(a) 1,100 47,465
============================================================================================
EMPLOYMENT SERVICES--0.62%
Robert Half International Inc. 300 8,181
============================================================================================
ENVIRONMENTAL SERVICES--3.04%
Waste Management, Inc. 1,400 39,760
============================================================================================
FOOD RETAIL--3.61%
Kroger Co. (The)(a) 1,650 28,875
--------------------------------------------------------------------------------------------
Safeway Inc.(a) 800 18,360
============================================================================================
47,235
============================================================================================
|
FS-243
MARKET
SHARES VALUE
--------------------------------------------------------------------------------------------
GENERAL MERCHANDISE STORES--1.99%
Target Corp. 600 $ 26,022
============================================================================================
HEALTH CARE DISTRIBUTORS--5.89%
Cardinal Health, Inc. 650 47,613
--------------------------------------------------------------------------------------------
McKesson Corp. 900 29,574
============================================================================================
77,187
============================================================================================
HEALTH CARE FACILITIES--1.24%
HCA Inc. 400 16,252
============================================================================================
HEALTH CARE SERVICES--2.80%
IMS Health Inc. 1,450 36,613
============================================================================================
HOTELS, RESORTS & CRUISE LINES--3.04%
Starwood Hotels & Resorts Worldwide, Inc. 1,000 39,790
============================================================================================
INDUSTRIAL CONGLOMERATES--4.82%
Tyco International Ltd. (Bermuda) 2,300 63,135
============================================================================================
INVESTMENT BANKING & BROKERAGE--3.31%
Merrill Lynch & Co., Inc. 800 43,384
============================================================================================
LEISURE PRODUCTS--3.77%
Brunswick Corp. 1,200 49,332
============================================================================================
MANAGED HEALTH CARE--3.48%
Aetna Inc. 550 45,513
============================================================================================
OIL & GAS DRILLING--3.99%
Pride International, Inc.(a) 1,450 24,462
--------------------------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 1,000 27,770
============================================================================================
52,232
============================================================================================
OIL & GAS EQUIPMENT & SERVICES--1.49%
Weatherford International Ltd. (Bermuda)(a) 450 19,566
============================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES--4.04%
Citigroup Inc. 1,100 52,899
============================================================================================
PHARMACEUTICALS--5.56%
Aventis S.A. (France)(a)(b) 320 24,225
--------------------------------------------------------------------------------------------
Pfizer Inc. 700 25,032
--------------------------------------------------------------------------------------------
Wyeth 620 23,603
============================================================================================
72,860
============================================================================================
PROPERTY & CASUALTY INSURANCE--2.85%
ACE Ltd. (Cayman Islands) 850 37,264
============================================================================================
|
FS-244
MARKET
SHARES VALUE
--------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT--1.77%
Novellus Systems, Inc.(a) 800 $ 23,168
============================================================================================
SYSTEMS SOFTWARE--4.50%
Computer Associates International, Inc. 2,200 58,982
============================================================================================
THRIFTS & MORTGAGE FINANCE--5.11%
Fannie Mae 635 43,637
--------------------------------------------------------------------------------------------
Radian Group Inc. 500 23,255
============================================================================================
66,892
============================================================================================
Total Common Stocks (Cost $951,839) 1,271,557
____________________________________________________________________________________________
============================================================================================
TOTAL INVESTMENTS--97.11% (Cost $951,839) 1,271,557
____________________________________________________________________________________________
============================================================================================
OTHER ASSETS LESS LIABILITIES--2.89% 37,901
____________________________________________________________________________________________
============================================================================================
NET ASSETS--100.00% $1,309,458
____________________________________________________________________________________________
============================================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the Board of Trustees. The market value of this security at 04/30/04 represented 1.91% of the Fund's total investments. See Note 1A.
See accompanying notes which are an integral part of the financial statements.
FS-245
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$951,839) $1,271,557
-----------------------------------------------------------
Cash 37,975
-----------------------------------------------------------
Receivables for:
Dividends 880
-----------------------------------------------------------
Amount due from advisor 11,378
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 4,264
-----------------------------------------------------------
Other assets 84
===========================================================
Total assets 1,326,138
___________________________________________________________
===========================================================
LIABILITIES:
Payables for deferred compensation and
retirement plans 4,264
-----------------------------------------------------------
Accrued trustees' fees 746
-----------------------------------------------------------
Accrued transfer agent fees 45
-----------------------------------------------------------
Accrued operating expenses 11,625
===========================================================
Total liabilities 16,680
===========================================================
Net assets applicable to shares outstanding $1,309,458
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 995,507
-----------------------------------------------------------
Undistributed net investment income (loss) (8,345)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 2,578
-----------------------------------------------------------
Unrealized appreciation of investment
securities 319,718
===========================================================
$1,309,458
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 523,778
___________________________________________________________
===========================================================
Class B $ 392,840
___________________________________________________________
===========================================================
Class C $ 392,840
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 40,477
___________________________________________________________
===========================================================
Class B 30,357
___________________________________________________________
===========================================================
Class C 30,357
___________________________________________________________
===========================================================
Class A :
Net asset value per share $ 12.94
-----------------------------------------------------------
Offering price per share:
(Net asset value of $12.94 divided
by 94.50%) $ 13.69
___________________________________________________________
===========================================================
Class B :
Net asset value and offering price per
share $ 12.94
___________________________________________________________
===========================================================
Class C :
Net asset value and offering price per
share $ 12.94
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-246
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends $ 6,554
========================================================================
EXPENSES:
Advisory fees 4,762
------------------------------------------------------------------------
Administrative services fees 24,863
------------------------------------------------------------------------
Custodian fees 743
------------------------------------------------------------------------
Distribution fees:
Class A 888
------------------------------------------------------------------------
Class B 1,905
------------------------------------------------------------------------
Class C 1,905
------------------------------------------------------------------------
Transfer agent fees 173
------------------------------------------------------------------------
Trustees' fees 5,869
------------------------------------------------------------------------
Reports to shareholders 4,165
------------------------------------------------------------------------
Professional fees 9,335
------------------------------------------------------------------------
Other 338
========================================================================
Total expenses 54,946
========================================================================
Less: Fees waived, expenses reimbursed and expense
offset arrangements (43,839)
========================================================================
Net expenses 11,107
========================================================================
Net investment income (loss) (4,553)
========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment securities 30,680
========================================================================
Change in net unrealized appreciation of investment securities 104,506
========================================================================
Net gain from investment securities 135,186
========================================================================
Net increase in net assets resulting from operations $130,633
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-247
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
--------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (4,553) $ (7,616)
--------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 30,680 (7,698)
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities 104,506 281,016
============================================================================================
Net increase in net assets resulting from operations 130,633 265,702
============================================================================================
Distributions to shareholders from net investment income:
Class A -- (4,400)
--------------------------------------------------------------------------------------------
Class B -- (3,300)
--------------------------------------------------------------------------------------------
Class C -- (3,300)
============================================================================================
Decrease in net assets resulting from distributions -- (11,000)
============================================================================================
Share transactions-net:
Class A -- 4,400
--------------------------------------------------------------------------------------------
Class B -- 3,300
--------------------------------------------------------------------------------------------
Class C -- 3,300
============================================================================================
Net increase in net assets resulting from
share transactions -- 11,000
============================================================================================
Net increase in net assets 130,633 265,702
============================================================================================
NET ASSETS:
Beginning of period 1,178,825 913,123
============================================================================================
End of period (including undistributed net investment
income (loss) of $(8,345) and $(3,792) for 2004 and
2003, respectively) $1,309,458 $1,178,825
____________________________________________________________________________________________
============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-248
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value II 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 authorized to issue an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. 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 is currently not open to investors.
The Fund's investment objective is to provide long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade
FS-249
on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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.
Brokerage commissions and mark ups are considered transactions costs
and are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii)
FS-250
currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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 and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO 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 $1 billion of the Fund's average daily net assets, plus 0.70% of the next $1 billion of the Fund's average daily net assets, plus 0.65% of the Fund's average daily net assets in excess of $2 billion. The Fund's advisor has voluntarily agreed to waive advisory fees or reimburse expenses of Class A, Class B and Class C shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) to 1.75%. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the 1.75% cap: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), as defined in the Financial Accounting Standard's Board's Generally Accepted Accounting Principles or as approved by the Fund's board of trustees; (v) expenses related to a merger or reorganization, as approved by the Fund's board of trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the only expense offset arrangements from which the Fund benefits are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. During periods of waivers or reimbursements to the extent the annualized expense ratio does not exceed the limit for the period committed, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the six months ended April 30, 2004, AIM waived fees of $4,762 and reimbursed expenses of $34,313.
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 six months ended April 30, 2004, AIM was paid $24,863 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. During the six months ended April 30, 2004, AISI retained $88 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and
FS-251
1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to 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 amount of sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. AIM Distributors has voluntarily agreed to waive all fees during the time the shares are not available for sale. Waivers may be modified or discontinued at any time. For the six months ended April 30, 2004, AIM Distributors waived all plan fees of $888, $1,905 and $1,905 for the Class A, Class B and Class C shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $8 and reductions in custodian fees of $58 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $66.
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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $2,274 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
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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.
FS-252
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
----------------------------------------------------------
----------------------------------------------------------
October 31, 2010 $ 20,338
October 31, 2011 7,764
----------------------------------------------------------
Total capital loss carryforward $ 28,102
__________________________________________________________
==========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 7--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 six months ended April 30, 2004 was $65,920 and $108,115, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $330,725
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (11,007)
-----------------------------------------------------------
Net unrealized appreciation of investment
securities $319,718
___________________________________________________________
===========================================================
|
Investments have the same cost for tax and financial statement purposes.
NOTE 8--SHARE INFORMATION
The Fund currently consists of three different classes of shares that are not available for sale: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2003
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A* -- $ -- 476 $ 4,400
--------------------------------------------------------------------------------------------------------------------------
Class B* -- -- 356 3,300
--------------------------------------------------------------------------------------------------------------------------
Class C* -- -- 356 3,300
==========================================================================================================================
-- $ -- 1,188 $ 11,000
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Currently, the Fund is not open to investors. All shares are owned by AIM.
FS-253
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------
AUGUST 30, 2002
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.65 $ 9.13 $10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.07) (0.01)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.34 2.70 (0.86)
=========================================================================================================================
Total from investment operations 1.29 2.63 (0.87)
=========================================================================================================================
Less dividends from net investment income -- (0.11) --
=========================================================================================================================
Net asset value, end of period $12.94 $11.65 $ 9.13
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(a) 11.07% 29.12% (8.70)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 524 $ 472 $ 365
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.76%(b) 1.83% 1.75%(c)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 8.26%(b) 10.27% 23.74%(c)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.72)%(b) (0.75)% (0.49)%(c)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(d) 5% 20% 4%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $510,703.
(c) Annualized.
(d) Not annualized for periods less than one year.
CLASS B
-----------------------------------------------------------
AUGUST 30, 2002
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.65 $ 9.13 $10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.07) (0.01)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.34 2.70 (0.86)
=========================================================================================================================
Total from investment operations 1.29 2.63 (0.87)
=========================================================================================================================
Less dividends from net investment income -- (0.11) --
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.94 $11.65 $ 9.13
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(a) 11.07% 29.12% (8.70)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 393 $ 354 $ 274
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.76%(b) 1.83% 1.75%(c)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 8.91%(b) 10.92% 24.39%(c)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.72)%(b) (0.75)% (0.49)%(c)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(d) 5% 20% 4%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $383,032.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-254
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------
AUGUST 30, 2002
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.65 $ 9.13 $10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.07) (0.01)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.34 2.70 (0.86)
=========================================================================================================================
Total from investment operations 1.29 2.63 (0.87)
=========================================================================================================================
Less dividends from net investment income -- (0.11) --
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.94 $11.65 $ 9.13
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(a) 11.07% 29.12% (8.70)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 393 $ 354 $ 274
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.76%(b) 1.83% 1.75%(c)
=========================================================================================================================
Without fee waivers and expense reimbursements 8.91%(b) 10.92% 24.39%(c)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.72)%(b) (0.75)% (0.49)%(c)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(d) 5% 20% 4%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $383,032.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-255
NOTE 10--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the
FS-256
NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,288 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other
FS-257
AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-258
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.48%
ADVERTISING-0.96%
Omnicom Group Inc. 350,000 $ 27,828,500
==============================================================================
AEROSPACE & DEFENSE-1.80%
Honeywell International Inc. 450,000 15,561,000
------------------------------------------------------------------------------
United Technologies Corp. 425,000 36,660,500
==============================================================================
52,221,500
==============================================================================
AIR FREIGHT & LOGISTICS-0.53%
United Parcel Service, Inc.-Class B 220,000 15,433,000
==============================================================================
ALUMINUM-0.77%
Alcoa Inc. 725,000 22,293,750
==============================================================================
APPAREL RETAIL-0.74%
Gap, Inc. (The) 975,000 21,459,750
==============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.76%
Franklin Resources, Inc. 400,000 21,932,000
==============================================================================
BIOTECHNOLOGY-1.94%
Amgen Inc.(a) 675,000 37,982,250
------------------------------------------------------------------------------
Genentech, Inc.(a) 150,000 18,420,000
==============================================================================
56,402,250
==============================================================================
BROADCASTING & CABLE TV-0.50%
Clear Channel Communications, Inc. 350,000 14,521,500
==============================================================================
BUILDING PRODUCTS-0.48%
Masco Corp. 500,000 14,005,000
==============================================================================
CASINOS & GAMING-0.71%
International Game Technology 550,000 20,757,000
==============================================================================
COMMUNICATIONS EQUIPMENT-2.66%
Cisco Systems, Inc.(a) 3,700,000 77,219,000
==============================================================================
COMPUTER & ELECTRONICS RETAIL-0.84%
Best Buy Co., Inc. 450,000 24,412,500
==============================================================================
COMPUTER HARDWARE-2.89%
Dell Inc.(a) 1,500,000 52,065,000
------------------------------------------------------------------------------
International Business Machines Corp. 360,000 31,741,200
==============================================================================
83,806,200
==============================================================================
|
------------------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS-0.89%
EMC Corp.(a) 2,325,000 25,947,000
==============================================================================
MARKET
SHARES VALUE
CONSUMER FINANCE-2.99%
American Express Co. 825,000 $ 40,383,750
------------------------------------------------------------------------------
MBNA Corp. 1,200,000 29,256,000
------------------------------------------------------------------------------
SLM Corp. 450,000 17,239,500
==============================================================================
86,879,250
==============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.25%
First Data Corp. 800,000 36,312,000
==============================================================================
DIVERSIFIED BANKS-2.01%
Bank of America Corp. 375,000 30,183,750
------------------------------------------------------------------------------
Wells Fargo & Co. 500,000 28,230,000
==============================================================================
58,413,750
==============================================================================
DIVERSIFIED CAPITAL MARKETS-1.94%
J.P. Morgan Chase & Co. 1,500,000 56,400,000
==============================================================================
DIVERSIFIED CHEMICALS-0.68%
Dow Chemical Co. (The) 500,000 19,845,000
==============================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.15%
Apollo Group, Inc.-Class A(a) 375,000 34,080,000
------------------------------------------------------------------------------
Cendant Corp.(b) 1,200,000 28,416,000
==============================================================================
62,496,000
==============================================================================
ELECTRIC UTILITIES-1.04%
FPL Group, Inc. 240,000 15,268,800
------------------------------------------------------------------------------
Southern Co. (The) 520,000 14,955,200
==============================================================================
30,224,000
==============================================================================
ENVIRONMENTAL SERVICES-0.66%
Waste Management, Inc. 675,000 19,170,000
==============================================================================
FOOD DISTRIBUTORS-1.05%
Sysco Corp. 800,000 30,600,000
==============================================================================
FOOTWEAR-0.74%
NIKE, Inc.-Class B 300,000 21,585,000
==============================================================================
GENERAL MERCHANDISE STORES-0.75%
Target Corp. 500,000 21,685,000
==============================================================================
HEALTH CARE EQUIPMENT-4.61%
Boston Scientific Corp.(a) 900,000 37,071,000
------------------------------------------------------------------------------
|
FS-259
MARKET
SHARES VALUE
------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-(CONTINUED)
Medtronic, Inc. 725,000 $ 36,583,500
------------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 250,000 19,065,000
------------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 515,200 41,138,720
==============================================================================
133,858,220
==============================================================================
HOME IMPROVEMENT RETAIL-1.58%
Home Depot, Inc. (The) 1,300,000 45,747,000
==============================================================================
HOTELS, RESORTS & CRUISE LINES-1.10%
Carnival Corp. (Panama)(b) 400,000 17,068,000
------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 375,000 14,921,250
==============================================================================
31,989,250
==============================================================================
HOUSEHOLD PRODUCTS-2.89%
Colgate-Palmolive Co. 400,000 23,152,000
------------------------------------------------------------------------------
Procter & Gamble Co. (The) 575,000 60,806,250
==============================================================================
83,958,250
==============================================================================
HOUSEWARES & SPECIALTIES-0.59%
Fortune Brands, Inc.(b) 225,000 17,156,250
==============================================================================
HYPERMARKETS & SUPER CENTERS-2.85%
Wal-Mart Stores, Inc. 1,450,000 82,650,000
==============================================================================
INDUSTRIAL CONGLOMERATES-4.87%
3M Co. 225,000 19,458,000
------------------------------------------------------------------------------
General Electric Co. 2,650,000 79,367,500
------------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,550,000 42,547,500
==============================================================================
141,373,000
==============================================================================
INDUSTRIAL GASES-0.64%
Air Products & Chemicals, Inc. 375,000 18,678,750
==============================================================================
INDUSTRIAL MACHINERY-1.76%
Danaher Corp. 325,000 30,069,000
------------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 325,000 20,978,750
==============================================================================
51,047,750
==============================================================================
INTEGRATED OIL & GAS-2.71%
Exxon Mobil Corp. 1,850,000 78,717,500
==============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.58%
SBC Communications Inc. 675,000 16,807,500
==============================================================================
INTERNET RETAIL-0.55%
eBay Inc.(a) 200,000 15,964,000
==============================================================================
INVESTMENT BANKING & BROKERAGE-3.88%
Goldman Sachs Group, Inc. (The) 415,000 40,151,250
------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 675,000 36,605,250
------------------------------------------------------------------------------
|
------------------------------------------------------------------------------
MARKET
SHARES VALUE
INVESTMENT BANKING & BROKERAGE-(CONTINUED)
Morgan Stanley 700,000 $ 35,973,000
==============================================================================
112,729,500
==============================================================================
MANAGED HEALTH CARE-1.38%
UnitedHealth Group Inc. 650,000 39,962,000
==============================================================================
MOVIES & ENTERTAINMENT-1.23%
Viacom Inc.-Class B 925,000 35,751,250
==============================================================================
MULTI-LINE INSURANCE-2.47%
American International Group, Inc. 1,000,000 71,650,000
==============================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.55%
Dominion Resources, Inc. 252,500 16,112,025
==============================================================================
OIL & GAS DRILLING-1.00%
ENSCO International Inc. 400,000 10,948,000
------------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 405,500 17,987,980
==============================================================================
28,935,980
==============================================================================
OIL & GAS EQUIPMENT & SERVICES-0.86%
Schlumberger Ltd. 425,000 24,875,250
==============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.56%
Citigroup Inc. 2,150,000 103,393,500
==============================================================================
PERSONAL PRODUCTS-1.33%
Avon Products, Inc.(b) 264,600 22,226,400
------------------------------------------------------------------------------
Gillette Co. (The) 400,000 16,368,000
==============================================================================
38,594,400
==============================================================================
PHARMACEUTICALS-7.49%
Allergan, Inc. 275,000 24,213,750
------------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 225,000 14,508,000
------------------------------------------------------------------------------
Johnson & Johnson 550,000 29,716,500
------------------------------------------------------------------------------
Lilly (Eli) & Co. 300,000 22,143,000
------------------------------------------------------------------------------
Pfizer Inc. 2,525,000 90,294,000
------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 349,800 21,533,688
------------------------------------------------------------------------------
Wyeth 400,000 15,228,000
==============================================================================
217,636,938
==============================================================================
PROPERTY & CASUALTY INSURANCE-0.63%
Allstate Corp. (The) 400,000 18,360,000
==============================================================================
RAILROADS-0.54%
Canadian National Railway Co. (Canada) 412,500 15,580,125
==============================================================================
RESTAURANTS-1.03%
McDonald's Corp.(a) 1,100,000 29,953,000
==============================================================================
|
FS-260
MARKET
SHARES VALUE
------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-1.00%
Applied Materials, Inc.(a) 900,000 $ 16,407,000
------------------------------------------------------------------------------
KLA-Tencor Corp.(a) 300,000 12,501,000
==============================================================================
28,908,000
==============================================================================
SEMICONDUCTORS-5.34%
Analog Devices, Inc. 475,000 20,235,000
------------------------------------------------------------------------------
Intel Corp. 2,100,000 54,033,000
------------------------------------------------------------------------------
Linear Technology Corp. 475,000 16,924,250
------------------------------------------------------------------------------
Microchip Technology Inc. 650,000 18,213,000
------------------------------------------------------------------------------
Texas Instruments Inc. 850,000 21,335,000
------------------------------------------------------------------------------
Xilinx, Inc. 725,000 24,381,750
==============================================================================
155,122,000
==============================================================================
SOFT DRINKS-1.98%
Coca-Cola Co. (The) 625,000 31,606,250
------------------------------------------------------------------------------
PepsiCo, Inc. 475,000 25,882,750
==============================================================================
57,489,000
==============================================================================
SPECIALTY STORES-1.27%
Bed Bath & Beyond Inc.(a) 575,000 21,344,000
------------------------------------------------------------------------------
Staples, Inc. 600,000 15,456,000
==============================================================================
36,800,000
==============================================================================
SYSTEMS SOFTWARE-5.23%
Microsoft Corp. 3,650,000 94,790,500
------------------------------------------------------------------------------
Oracle Corp.(a) 2,350,860 26,376,649
------------------------------------------------------------------------------
VERITAS Software Corp.(a) 1,150,000 30,670,500
==============================================================================
151,837,649
==============================================================================
THRIFTS & MORTGAGE FINANCE-1.12%
Fannie Mae 475,000 32,642,000
==============================================================================
|
------------------------------------------------------------------------------
MARKET
SHARES VALUE
WIRELESS TELECOMMUNICATION SERVICES-1.13%
Nextel Communications, Inc.-Class A(a) 350,000 $ 8,351,000
------------------------------------------------------------------------------
Vodafone Group PLC-ADR (United Kingdom)(b) 1,000,000 24,540,000
==============================================================================
32,891,000
==============================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,279,862,292) 2,889,020,037
______________________________________________________________________________
==============================================================================
MONEY MARKET FUNDS-0.96%
Liquid Assets Portfolio-Institutional
Class(c) 13,940,952 13,940,952
------------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 13,940,952 13,940,952
______________________________________________________________________________
==============================================================================
Total Money Market Funds (Cost $27,881,904) 27,881,904
==============================================================================
TOTAL INVESTMENTS-100.44% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,307,744,196) 2,916,901,941
==============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.01%
Liquid Assets Portfolio-Institutional
Class(c)(d) 29,403,400 29,403,400
______________________________________________________________________________
==============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $29,403,400) 29,403,400
______________________________________________________________________________
==============================================================================
TOTAL INVESTMENTS-101.45% (Cost
$2,337,147,596) 2,946,305,341
==============================================================================
OTHER ASSETS LESS LIABILITIES-(1.45%) (42,204,984)
==============================================================================
NET ASSETS-100.00% $2,904,100,357
______________________________________________________________________________
==============================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-261
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$2,279,862,292)* $ 2,889,020,037
------------------------------------------------------------
Investments in affiliated money market
funds (cost $57,285,304) 57,285,304
============================================================
Total investments (cost
$2,337,147,596) 2,946,305,341
============================================================
Receivables for:
Investments sold 38,453,929
------------------------------------------------------------
Fund shares sold 2,024,203
------------------------------------------------------------
Dividends 2,535,242
------------------------------------------------------------
Amount due from advisor 50,196
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 147,152
------------------------------------------------------------
Other assets 94,404
============================================================
Total assets 2,989,610,467
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 40,833,052
------------------------------------------------------------
Fund shares reacquired 11,202,655
------------------------------------------------------------
Deferred compensation and retirement
plans 250,251
------------------------------------------------------------
Collateral upon return of securities
loaned 29,403,400
------------------------------------------------------------
Accrued distribution fees 1,687,584
------------------------------------------------------------
Accrued trustees' fees 2,277
------------------------------------------------------------
Accrued transfer agent fees 1,826,032
------------------------------------------------------------
Accrued operating expenses 304,859
============================================================
Total liabilities 85,510,110
============================================================
Net assets applicable to shares outstanding $ 2,904,100,357
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 4,039,113,228
------------------------------------------------------------
Undistributed net investment income (loss) (8,235,730)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (1,735,934,886)
------------------------------------------------------------
Unrealized appreciation of investment
securities 609,157,745
============================================================
$ 2,904,100,357
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,427,468,816
____________________________________________________________
============================================================
Class B $ 1,166,650,123
____________________________________________________________
============================================================
Class C $ 267,627,937
____________________________________________________________
============================================================
Class R $ 5,656,038
____________________________________________________________
============================================================
Investor Class $ 35,139,632
____________________________________________________________
============================================================
Institutional Class $ 1,557,811
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 130,069,473
____________________________________________________________
============================================================
Class B 111,518,950
____________________________________________________________
============================================================
Class C 25,584,252
____________________________________________________________
============================================================
Class R 516,692
____________________________________________________________
============================================================
Investor Class 3,197,774
____________________________________________________________
============================================================
Institutional Class 139,955
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 10.97
------------------------------------------------------------
Offering price per share:
(Net asset value of $10.97 divided by
94.50%) $ 11.61
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.46
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.46
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 10.95
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 10.99
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 11.13
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $16,289,067 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-262
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $32,003) $17,619,838
-------------------------------------------------------------------------
Dividends from affiliated money market funds* 322,756
=========================================================================
Total investment income 17,942,594
=========================================================================
EXPENSES:
Advisory fees 9,697,920
-------------------------------------------------------------------------
Administrative services fees 294,140
-------------------------------------------------------------------------
Custodian fees 129,006
-------------------------------------------------------------------------
Distribution fees:
Class A 2,578,702
-------------------------------------------------------------------------
Class B 6,150,328
-------------------------------------------------------------------------
Class C 1,436,174
-------------------------------------------------------------------------
Class R 13,120
-------------------------------------------------------------------------
Investor Class 46,281
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 4,859,355
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 30
-------------------------------------------------------------------------
Trustees' fees 26,604
-------------------------------------------------------------------------
Other 783,610
=========================================================================
Total expenses 26,015,270
=========================================================================
Less: Fees waived and expense offset arrangements (30,876)
=========================================================================
Net expenses 25,984,394
=========================================================================
Net investment income (loss) (8,041,800)
=========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment securities 84,064,458
-------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 2,918,149
=========================================================================
Net gain from investment securities 86,982,607
=========================================================================
Net increase in net assets resulting from operations $78,940,807
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-263
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (8,041,800) $ (14,101,484)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 84,064,458 (105,157,212)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 2,918,149 519,286,935
==============================================================================================
Net increase in net assets resulting from operations 78,940,807 400,028,239
==============================================================================================
Share transactions-net:
Class A (51,795,405) (162,460,380)
----------------------------------------------------------------------------------------------
Class B (87,835,410) (136,334,779)
----------------------------------------------------------------------------------------------
Class C (30,190,906) (51,018,964)
----------------------------------------------------------------------------------------------
Class R 4,030,985 1,425,250
----------------------------------------------------------------------------------------------
Investor Class 33,920,455 99,068
----------------------------------------------------------------------------------------------
Institutional Class 1,481,225 (43,881)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (130,389,056) (348,333,686)
==============================================================================================
Net increase (decrease) in net assets (51,448,249) 51,694,553
==============================================================================================
NET ASSETS:
Beginning of period 2,955,548,606 2,903,854,053
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(8,235,730) and $(193,930) for 2004
and 2003, respectively) $2,904,100,357 $2,955,548,606
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-264
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis.
FS-265
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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. 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. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts.
I. 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
FS-266
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 FEES PAID TO 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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $8,090.
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 six months ended April 30, 2004, AIM was paid $294,140 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 six months ended April 30, 2004, AISI retained $2,297,912.
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, Investor Class and 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, Class R and 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $2,578,702, $6,150,328, $1,436,174, $13,120 and $46,281, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $215,357 in front-end sales commissions from the sale of Class A shares and $2,057, $20,132, $7,290 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--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional Class $32,255,406 $ 81,739,346 $(100,053,800) $ -- $13,940,952 $156,530
--------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional Class 32,255,406 81,739,346 (100,053,800) -- 13,940,952 154,261
==========================================================================================================================
Subtotal $64,510,812 $163,478,692 $(200,107,600) $ -- $27,881,904 $310,791
==========================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ --
--------------------------------------------
STIC Prime
Portfolio-Institutional Class --
============================================
Subtotal $ --
============================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME*
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ 447,700 $307,399,404 $(278,443,704) $ -- $29,403,400 $ 11,965
==========================================================================================================================
Total $64,958,512 $470,878,096 $(478,551,304) $ -- $57,285,304 $322,756
__________________________________________________________________________________________________________________________
==========================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ --
============================================
Total $ --
____________________________________________
============================================
|
* Dividend income is net of fees paid to security lending counterparties of $106,176.
FS-267
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $22,784 and reductions in custodian fees of $2 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $22,786.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $7,387 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $16,289,067 were on loan to brokers. The loans were secured by cash collateral of $29,403,400 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $11,965 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
FS-268
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 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
__________________________________________________________
==========================================================
* Any capital loss carryforward listed will be reduced for
limitations, if any, to the extent required by the
Internal Revenue Code.
|
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 six months ended April 30, 2004 was $521,850,589 and $634,660,853, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $609,886,693
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (41,371,641)
===========================================================
Net unrealized appreciation of investment
securities $568,515,052
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $2,377,790,289.
|
NOTE 10--SHARE INFORMATION
The Fund currently offers six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, Investor Class shares and 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, Investor Class shares and 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
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 13,437,489 $ 150,031,880 30,092,109 $ 289,868,346
--------------------------------------------------------------------------------------------------------------------------
Class B 4,640,600 49,531,200 12,053,281 111,049,162
--------------------------------------------------------------------------------------------------------------------------
Class C 1,613,866 17,233,561 4,161,204 38,212,257
--------------------------------------------------------------------------------------------------------------------------
Class R 538,147 5,936,141 164,023 1,619,420
--------------------------------------------------------------------------------------------------------------------------
Investor Class* 340,144 3,792,045 12,285 130,138
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 134,659 1,564,746 -- --
==========================================================================================================================
Issued in connection with acquisitions:**
Class A 63,333 676,707 -- --
--------------------------------------------------------------------------------------------------------------------------
Class B 14,065 143,763 -- --
--------------------------------------------------------------------------------------------------------------------------
Class C 98,131 1,002,254 -- --
--------------------------------------------------------------------------------------------------------------------------
Investor Class* 3,554,717 38,013,823 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,110,489 12,493,779 1,670,042 16,099,491
--------------------------------------------------------------------------------------------------------------------------
Class B (1,163,754) (12,493,779) (1,741,215) (16,099,491)
==========================================================================================================================
Reacquired:
Class A (19,258,599) (214,997,771) (49,132,867) (468,428,217)
--------------------------------------------------------------------------------------------------------------------------
Class B (11,734,023) (125,016,594) (25,556,829) (231,284,450)
--------------------------------------------------------------------------------------------------------------------------
Class C (4,547,400) (48,426,721) (9,824,798) (89,231,221)
--------------------------------------------------------------------------------------------------------------------------
Class R (169,406) (1,905,156) (20,044) (194,170)
--------------------------------------------------------------------------------------------------------------------------
Investor Class* (706,465) (7,885,413) (2,907) (31,070)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (7,264) (83,521) (4,720) (43,881)
==========================================================================================================================
(12,041,271) $(130,389,056) (38,130,436) $(348,333,686)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Investor Class shares commenced sales on September 30, 2003. ** As of the opening of business on November 3, 2003, the Fund acquired all of the net assets of INVESCO Growth & Income Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on June 11, 2003 and INVESCO Growth & Income Fund shareholders on October 21, 2003. The acquisition was accomplished by a tax-free exchange of 3,730,246 shares of the Fund for 5,685,449 shares of INVESCO Growth & Income Fund outstanding as of the close business on October 31, 2003. INVESCO Growth & Income Fund's net assets at that date of $39,836,547 including $4,907,031 of unrealized appreciation were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $2,958,513,063.
FS-269
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A(a)
--------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49 $ 12.05
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(b) (0.02) (0.04)(b) (0.04) (0.05)(b) 0.01
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.29 1.49 (1.96) (6.03) 1.85 3.47
=================================================================================================================================
Total from investment
operations 0.28 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 $ 10.97 $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.62% 15.94% (17.82)% (35.11)% 11.60% 29.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,427,469 $1,439,518 $1,402,589 $2,067,602 $3,163,453 $2,299,551
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.39%(d) 1.47% 1.40% 1.28% 1.19% 1.19%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.21)%(d) (0.17)% (0.33)% (0.29)% (0.31)% 0.03%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 18% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,481,640,142.
(e) Not annualized for periods less than one year.
CLASS B(a)
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22 $ 11.91
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(b) (0.08) (0.10)(b) (0.13) (0.17)(b) (0.10)(b)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.29 1.42 (1.89) (5.87) 1.82 3.44
===============================================================================================================================
Total from investment operations 0.24 1.34 (1.99) (6.00) 1.65 3.34
===============================================================================================================================
Less distributions from net realized
gains -- -- -- -- -- (0.03)
===============================================================================================================================
Net asset value, end of period $ 10.46 $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) 2.35% 15.09% (18.31)% (35.57)% 10.87% 28.08%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,166,650 $1,223,821 $1,198,513 $1,806,464 $2,746,149 $1,891,171
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net
assets 2.04%(d) 2.12% 2.05% 1.94% 1.88% 1.91%
===============================================================================================================================
Ratio of net investment income (loss)
to average net assets (0.86)%(d) (0.82)% (0.98)% (0.94)% (1.00)% (0.68)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(e) 18% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,236,824,172.
(e) Not annualized for periods less than one year.
FS-270
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C(a)
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------
2004 2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21 $ 11.91
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(b) (0.08) (0.10)(b) (0.13) (0.17)(b) (0.10)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.29 1.42 (1.89) (5.86) 1.82 3.43
=========================================================================================================================
Total from investment operations 0.24 1.34 (1.99) (5.99) 1.65 3.33
=========================================================================================================================
Less distributions from net realized
gains -- -- -- -- -- (0.03)
=========================================================================================================================
Net asset value, end of period $ 10.46 $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 2.35% 15.09% (18.31)% (35.53)% 10.82% 28.09%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $267,628 $290,396 $302,555 $487,838 $720,186 $349,951
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 2.04%(d) 2.12% 2.05% 1.94% 1.88% 1.90%
=========================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.86)%(d) (0.82)% (0.98)% (0.94)% (1.00)% (0.68)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 18% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$288,813,038.
(e) Not annualized for periods less than one year.
CLASS R
-----------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.66 $ 9.22 $ 10.53
-------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.00) (0.02)(a)
-------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.31 1.44 (1.29)
=============================================================================================================
Total from investment operations 0.29 1.44 (1.31)
=============================================================================================================
Net asset value, end of period $10.95 $10.66 $ 9.22
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 2.72% 15.62% (12.44)%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,656 $1,578 $ 37
_____________________________________________________________________________________________________________
=============================================================================================================
Ratio of expenses to average net assets 1.54%(c) 1.62% 1.55%(d)
=============================================================================================================
Ratio of net investment income (loss) to average net assets (0.36)%(c) (0.32)% (0.49)%(d)
_____________________________________________________________________________________________________________
=============================================================================================================
Portfolio turnover rate(e) 18% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$5,276,776.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-271
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
--------------------------------
SEPTEMBER 30,
2003
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.69 $10.16
----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (0.01)(a) (0.00)
----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.31 0.53
==============================================================================================
Total from investment operations 0.30 0.53
==============================================================================================
Net asset value, end of period $ 10.99 $10.69
______________________________________________________________________________________________
==============================================================================================
Total return(b) 2.81% 5.22%
______________________________________________________________________________________________
==============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $35,140 $ 100
______________________________________________________________________________________________
==============================================================================================
Ratio of expenses to average net assets: 1.29%(c) 1.29%(d)
==============================================================================================
Ratio of net investment income (loss) to average net assets (0.11)%(c) (0.01)%(d)
______________________________________________________________________________________________
==============================================================================================
Portfolio turnover rate(e) 18% 28%
______________________________________________________________________________________________
==============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$37,228,363.
(d) Annualized.
(e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-----------------------------------------------
MARCH 15,
2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.81 $ 9.26 $ 12.13
-------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03(a) 0.06 0.02(a)
-------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.29 1.49 (2.89)
=============================================================================================================
Total from investment operations 0.32 1.55 (2.87)
=============================================================================================================
Net asset value, end of period $11.13 $10.81 $ 9.26
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 2.96% 16.74% (23.66)%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,558 $ 136 $ 160
_____________________________________________________________________________________________________________
=============================================================================================================
Ratio of expenses to average net assets 0.73%(c) 0.77% 0.77%(d)
=============================================================================================================
Ratio of net investment income to average net assets 0.45%(c) 0.53% 0.30%(d)
_____________________________________________________________________________________________________________
=============================================================================================================
Portfolio turnover rate(e) 18% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of $603,318.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-272
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $108,058 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc.,
FS-273
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-274
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-91.70%
ADVERTISING-1.54%
Interpublic Group of Cos., Inc. (The)(a)(b) 691,600 $ 10,851,204
--------------------------------------------------------------------------
Lamar Advertising Co.(a)(b) 136,000 5,584,160
==========================================================================
16,435,364
==========================================================================
AIR FREIGHT & LOGISTICS-1.06%
Robinson (C.H.) Worldwide, Inc. 274,900 11,281,896
==========================================================================
APPAREL RETAIL-2.24%
Limited Brands 560,300 11,564,592
--------------------------------------------------------------------------
Ross Stores, Inc. 402,400 12,273,200
==========================================================================
23,837,792
==========================================================================
APPLICATION SOFTWARE-2.97%
Amdocs Ltd. (United Kingdom)(a) 365,400 9,701,370
--------------------------------------------------------------------------
Autodesk, Inc. 363,300 12,170,550
--------------------------------------------------------------------------
Siebel Systems, Inc.(a) 947,400 9,739,272
==========================================================================
31,611,192
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.97%
Affiliated Managers Group, Inc.(a)(b) 211,500 10,300,050
==========================================================================
BROADCASTING & CABLE TV-1.62%
Cox Radio, Inc.-Class A(a) 300,000 6,213,000
--------------------------------------------------------------------------
Westwood One, Inc.(a) 372,600 11,006,604
==========================================================================
17,219,604
==========================================================================
BUILDING PRODUCTS-1.01%
American Standard Cos. Inc.(a) 102,300 10,760,937
==========================================================================
CASINOS & GAMING-2.27%
GTECH Holdings Corp. 193,200 11,769,744
--------------------------------------------------------------------------
Harrah's Entertainment, Inc. 234,400 12,465,392
==========================================================================
24,235,136
==========================================================================
COMMERCIAL PRINTING-1.05%
Donnelley (R.R.) & Sons Co.(b) 379,764 11,172,657
==========================================================================
COMMUNICATIONS EQUIPMENT-1.64%
Harris Corp. 224,400 10,109,220
--------------------------------------------------------------------------
UTStarcom, Inc.(a)(b) 278,200 7,330,570
==========================================================================
17,439,790
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.21%
Cummins Inc.(b) 117,100 $ 7,003,751
--------------------------------------------------------------------------
Navistar International Corp.(a)(b) 130,900 5,910,135
==========================================================================
12,913,886
==========================================================================
CONSUMER FINANCE-0.92%
AmeriCredit Corp.(a)(b) 602,000 9,758,420
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.24%
Alliance Data Systems Corp.(a) 354,200 12,315,534
--------------------------------------------------------------------------
Certegy Inc. 164,550 5,887,599
--------------------------------------------------------------------------
DST Systems, Inc.(a)(b) 234,800 10,366,420
--------------------------------------------------------------------------
Iron Mountain Inc.(a)(b) 131,100 5,966,361
==========================================================================
34,535,914
==========================================================================
DISTILLERS & VINTNERS-0.76%
Constellation Brands, Inc.-Class A(a) 244,000 8,083,720
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.30%
ARAMARK Corp.-Class B 398,700 11,402,820
--------------------------------------------------------------------------
Corrections Corp. of America(a) 225,200 8,206,288
--------------------------------------------------------------------------
United Rentals, Inc.(a) 286,500 4,927,800
==========================================================================
24,536,908
==========================================================================
DIVERSIFIED METALS & MINING-1.32%
Consol Energy Inc.(c) 489,400 14,011,522
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.19%
Cooper Industries, Ltd.-Class A (Bermuda) 214,000 11,750,740
--------------------------------------------------------------------------
Rockwell Automation, Inc. 354,600 11,591,874
==========================================================================
23,342,614
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-3.94%
Aeroflex Inc.(a) 580,000 7,296,400
--------------------------------------------------------------------------
Amphenol Corp.-Class A(a) 332,400 10,507,164
--------------------------------------------------------------------------
Varian Inc.(a) 282,800 11,606,112
--------------------------------------------------------------------------
Waters Corp.(a) 292,400 12,617,060
==========================================================================
42,026,736
==========================================================================
|
FS-275
MARKET
SHARES VALUE
--------------------------------------------------------------------------
ENVIRONMENTAL SERVICES-1.18%
Republic Services, Inc. 435,000 $ 12,536,700
==========================================================================
GAS UTILITIES-0.60%
Kinder Morgan, Inc. 105,800 6,370,218
==========================================================================
GENERAL MERCHANDISE STORES-0.88%
Dollar General Corp. 498,400 9,349,984
==========================================================================
HEALTH CARE DISTRIBUTORS-1.16%
Omnicare, Inc. 298,300 12,373,484
==========================================================================
HEALTH CARE EQUIPMENT-1.97%
Bard (C.R.), Inc. 85,100 9,043,577
--------------------------------------------------------------------------
Hillenbrand Industries, Inc. 177,600 11,988,000
==========================================================================
21,031,577
==========================================================================
HEALTH CARE FACILITIES-2.05%
Health Management Associates, Inc.-Class A 323,800 7,489,494
--------------------------------------------------------------------------
Select Medical Corp. 286,800 5,434,860
--------------------------------------------------------------------------
Universal Health Services, Inc.-Class B 204,100 8,959,990
==========================================================================
21,884,344
==========================================================================
HEALTH CARE SERVICES-5.14%
Apria Healthcare Group Inc.(a) 349,100 10,068,044
--------------------------------------------------------------------------
Caremark Rx, Inc.(a) 410,277 13,887,876
--------------------------------------------------------------------------
Covance Inc.(a) 198,900 6,710,886
--------------------------------------------------------------------------
DaVita, Inc.(a) 225,700 11,533,270
--------------------------------------------------------------------------
Express Scripts, Inc.(a) 162,800 12,590,952
==========================================================================
54,791,028
==========================================================================
HEALTH CARE SUPPLIES-1.32%
Fisher Scientific International Inc.(a)(b) 240,100 14,057,855
==========================================================================
HOME FURNISHINGS-0.91%
Tempur-Pedic International Inc.(a) 618,800 9,659,468
==========================================================================
HOTELS, RESORTS & CRUISE LINES-0.42%
Starwood Hotels & Resorts Worldwide, Inc. 113,800 4,528,102
==========================================================================
HOUSEWARES & SPECIALTIES-1.04%
Yankee Candle Co., Inc. (The)(a) 408,400 11,059,472
==========================================================================
HYPERMARKETS & SUPER CENTERS-0.75%
BJ's Wholesale Club, Inc.(a) 327,900 7,945,017
==========================================================================
INDUSTRIAL GASES-0.95%
Airgas, Inc. 455,000 10,078,250
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INDUSTRIAL MACHINERY-2.34%
Parker Hannifin Corp. 227,000 $ 12,550,830
--------------------------------------------------------------------------
SPX Corp. 279,000 12,373,650
==========================================================================
24,924,480
==========================================================================
INSURANCE BROKERS-0.94%
Willis Group Holdings Ltd. (Bermuda) 276,000 10,021,560
==========================================================================
INTEGRATED OIL & GAS-0.83%
Murphy Oil Corp. 129,500 8,870,750
==========================================================================
INTERNET SOFTWARE & SERVICES-0.94%
United Online, Inc.(a)(b) 600,800 9,973,280
==========================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED
FUNDS-1.03%
iShares Nasdaq Biotechnology Index Fund(a)(b) 140,800 10,948,608
==========================================================================
LEISURE PRODUCTS-1.95%
Brunswick Corp. 262,700 10,799,597
--------------------------------------------------------------------------
Hasbro, Inc. 530,300 10,017,367
==========================================================================
20,816,964
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.60%
Questar Corp. 154,600 5,483,662
--------------------------------------------------------------------------
Williams Cos., Inc. (The) 1,120,100 11,537,030
==========================================================================
17,020,692
==========================================================================
OFFICE ELECTRONICS-0.56%
Zebra Technologies Corp.-Class A(a)(b) 81,150 5,947,484
==========================================================================
OIL & GAS DRILLING-0.71%
Pride International, Inc.(a)(b) 447,300 7,545,951
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.43%
BJ Services Co.(a)(b) 213,200 9,487,400
--------------------------------------------------------------------------
Key Energy Services, Inc.(a) 539,500 5,751,070
==========================================================================
15,238,470
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.10%
XTO Energy, Inc. 439,125 11,724,638
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.02%
Ashland Inc. 226,300 10,839,770
==========================================================================
PACKAGED FOODS & MEATS-0.52%
Flowers Foods, Inc. 228,400 5,593,516
==========================================================================
|
FS-276
MARKET
SHARES VALUE
--------------------------------------------------------------------------
PAPER PACKAGING-1.99%
Sealed Air Corp.(a)(b) 202,200 $ 9,923,976
--------------------------------------------------------------------------
Smurfit-Stone Container Corp.(a) 659,100 11,329,929
==========================================================================
21,253,905
==========================================================================
PERSONAL PRODUCTS-1.15%
NBTY, Inc.(a) 331,100 12,303,676
==========================================================================
PHARMACEUTICALS-2.01%
Medicis Pharmaceutical Corp.-Class A 195,200 8,377,984
--------------------------------------------------------------------------
Mylan Laboratories Inc. 215,100 4,927,941
--------------------------------------------------------------------------
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom)(a) 293,447 8,143,154
==========================================================================
21,449,079
==========================================================================
PROPERTY & CASUALTY INSURANCE-2.29%
ACE Ltd. (Cayman Islands) 270,617 11,863,849
--------------------------------------------------------------------------
Quanta Capital Holdings Ltd. (Bermuda)
(Acquired 08/27/03; Cost
$10,000,000)(a)(c)(d) 1,000,000 12,500,000
==========================================================================
24,363,849
==========================================================================
PUBLISHING-0.31%
Journal Communications, Inc.-Class A 189,700 3,350,102
==========================================================================
REAL ESTATE-1.93%
Fieldstone Investment Corp. (Acquired
11/10/03-11/11/03; Cost
$9,984,140)(a)(c)(d) 661,900 12,245,150
--------------------------------------------------------------------------
Friedman, Billings, Ramsey Group, Inc.-Class
A 449,155 8,309,368
==========================================================================
20,554,518
==========================================================================
REINSURANCE-1.01%
Platinum Underwriters Holdings, Ltd.
(Bermuda) 337,200 10,783,656
==========================================================================
RESTAURANTS-0.96%
Ruby Tuesday, Inc.(b) 342,700 10,253,584
==========================================================================
SEMICONDUCTOR EQUIPMENT-1.45%
Cabot Microelectronics Corp.(a)(b) 212,200 6,266,266
--------------------------------------------------------------------------
Novellus Systems, Inc.(a)(b) 317,100 9,183,216
==========================================================================
15,449,482
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SEMICONDUCTORS-3.58%
Cypress Semiconductor Corp.(a)(b) 355,300 $ 4,963,541
--------------------------------------------------------------------------
Intersil Corp.-Class A(b) 276,300 5,456,925
--------------------------------------------------------------------------
LSI Logic Corp.(a)(b) 912,400 6,788,256
--------------------------------------------------------------------------
Microchip Technology Inc. 311,162 8,718,759
--------------------------------------------------------------------------
NVIDIA Corp.(a)(b) 392,400 8,059,896
--------------------------------------------------------------------------
Semiconductor Manufacturing International
Corp. (Cayman Islands)(a)(b) 357,500 4,179,175
==========================================================================
38,166,552
==========================================================================
SPECIALTY CHEMICALS-0.94%
Great Lakes Chemical Corp. 397,300 9,980,176
==========================================================================
SPECIALTY STORES-1.60%
Advance Auto Parts, Inc.(a) 275,200 11,874,880
--------------------------------------------------------------------------
Rent-A-Center, Inc.(a) 178,400 5,221,768
==========================================================================
17,096,648
==========================================================================
SYSTEMS SOFTWARE-1.14%
Check Point Software Technologies Ltd.
(Israel)(a) 518,000 12,136,740
==========================================================================
TECHNOLOGY DISTRIBUTORS-0.92%
CDW Corp.(b) 156,100 9,754,689
==========================================================================
THRIFTS & MORTGAGE FINANCE-3.79%
New York Community Bancorp, Inc.(b) 427,588 10,719,631
--------------------------------------------------------------------------
PMI Group, Inc. (The) 276,900 11,915,007
--------------------------------------------------------------------------
Radian Group Inc. 242,800 11,292,628
--------------------------------------------------------------------------
Saxon Capital, Inc.(a)(c) 296,600 6,451,050
==========================================================================
40,378,316
==========================================================================
TRUCKING-1.04%
Sirva Inc.(a) 477,300 11,087,679
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $741,470,113) 976,998,451
==========================================================================
|
FS-277
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MONEY MARKET FUNDS-7.36%
Liquid Assets Portfolio-Institutional
Class(e) 39,196,034 $ 39,196,034
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 39,196,034 39,196,034
==========================================================================
Total Money Market Funds (Cost
$78,392,068) 78,392,068
==========================================================================
TOTAL INVESTMENTS-99.06% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $819,862,181) 1,055,390,519
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-13.86%
Liquid Assets Portfolio-Institutional
Class(e)(f) 73,853,619 73,853,619
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(e)(f) 73,853,619 73,853,619
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $147,707,238) 147,707,238
==========================================================================
TOTAL INVESTMENTS-112.92% (Cost $967,569,419) 1,203,097,757
==========================================================================
OTHER ASSETS LESS LIABILITIES-(12.92%) (137,697,521)
==========================================================================
NET ASSETS-100.00% $1,065,400,236
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) Security fair valued in accordance with the procedures established by
the Board of Trustees. The aggregate market value of these securities at
04/30/04 was $45,207,722 which represented 3.76% of the Fund's total
investments. See Note 1A.
(d) 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 04/30/04 was $24,745,150, which represented 2.32% of the
Fund's net assets. These securities are considered to be illiquid.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(f) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-278
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$741,470,113)* $ 976,998,451
------------------------------------------------------------
Investments in affiliated money market funds
(cost $226,099,306) 226,099,306
============================================================
Total investments (cost $967,569,419) 1,203,097,757
____________________________________________________________
============================================================
Receivables for:
Investments sold 16,433,882
------------------------------------------------------------
Fund shares sold 1,376,183
------------------------------------------------------------
Dividends 256,311
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 68,569
------------------------------------------------------------
Other assets 46,795
============================================================
Total assets 1,221,279,497
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,176,810
------------------------------------------------------------
Fund shares reacquired 1,534,416
------------------------------------------------------------
Deferred compensation and retirement plans 106,511
------------------------------------------------------------
Collateral upon return of securities
loaned 147,707,238
------------------------------------------------------------
Accrued distribution fees 658,785
------------------------------------------------------------
Accrued trustees' fees 1,225
------------------------------------------------------------
Accrued transfer agent fees 549,767
------------------------------------------------------------
Accrued operating expenses 144,509
============================================================
Total liabilities 155,879,261
============================================================
Net assets applicable to shares outstanding $1,065,400,236
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 750,808,797
------------------------------------------------------------
Undistributed net investment income (loss) (2,614,104)
------------------------------------------------------------
Undistributed net realized gain from
investment securities 81,677,205
------------------------------------------------------------
Unrealized appreciation of investment
securities 235,528,338
============================================================
$1,065,400,236
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 585,199,850
____________________________________________________________
============================================================
Class B $ 403,059,017
____________________________________________________________
============================================================
Class C $ 74,448,441
____________________________________________________________
============================================================
Class R $ 2,681,865
____________________________________________________________
============================================================
Institutional Class $ 11,063
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 33,320,309
____________________________________________________________
============================================================
Class B 24,333,526
____________________________________________________________
============================================================
Class C 4,497,813
____________________________________________________________
============================================================
Class R 153,261
____________________________________________________________
============================================================
Institutional Class 622
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 17.56
------------------------------------------------------------
Offering price per share:
(Net asset value of $17.56 divided by
94.50%) $ 18.58
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 16.56
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 16.55
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 17.50
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 17.79
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $142,848,903 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-279
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $3,998) $ 5,870,210
-------------------------------------------------------------------------
Dividends from affiliated money market funds* 354,205
=========================================================================
Total investment income 6,224,415
=========================================================================
EXPENSES:
Advisory fees 3,529,256
-------------------------------------------------------------------------
Administrative services fees 141,761
-------------------------------------------------------------------------
Custodian fees 61,545
-------------------------------------------------------------------------
Distribution fees:
Class A 1,009,233
-------------------------------------------------------------------------
Class B 2,043,112
-------------------------------------------------------------------------
Class C 362,759
-------------------------------------------------------------------------
Class R 4,637
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 1,296,736
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 31
-------------------------------------------------------------------------
Trustees' fees 12,514
-------------------------------------------------------------------------
Other 303,449
=========================================================================
Total expenses 8,765,033
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (12,111)
=========================================================================
Net expenses 8,752,922
=========================================================================
Net investment income (loss) (2,528,507)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 83,716,427
=========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (2,795,637)
=========================================================================
Net gain from investment securities 80,920,790
=========================================================================
Net increase in net assets resulting from operations $78,392,283
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-280
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,528,507) $ (7,651,741)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 83,716,427 64,445,148
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (2,795,637) 180,427,376
==============================================================================================
Net increase in net assets resulting from operations 78,392,283 237,220,783
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (13,528,011) --
----------------------------------------------------------------------------------------------
Class B (10,257,676) --
----------------------------------------------------------------------------------------------
Class C (1,789,355) --
----------------------------------------------------------------------------------------------
Class R (30,198) --
----------------------------------------------------------------------------------------------
Institutional Class (242) --
==============================================================================================
Decrease in net assets resulting from distributions (25,605,482) --
==============================================================================================
Share transactions-net:
Class A 9,885,396 (40,295,276)
----------------------------------------------------------------------------------------------
Class B (9,071,180) (45,852,897)
----------------------------------------------------------------------------------------------
Class C 2,736,875 (3,420,452)
----------------------------------------------------------------------------------------------
Class R 1,468,780 902,244
----------------------------------------------------------------------------------------------
Institutional Class 742 --
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions 5,020,613 (88,666,381)
==============================================================================================
Net increase in net assets 57,807,414 148,554,402
==============================================================================================
NET ASSETS:
Beginning of period 1,007,592,822 859,038,420
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(2,614,104) and $(85,597) for 2004 and
2003, respectively) $1,065,400,236 $1,007,592,822
______________________________________________________________________________________________
==============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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.
FS-281
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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
FS-282
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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 FEES PAID TO 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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $4,239.
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 six months ended April 30, 2004, AIM was paid $141,761 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 six months ended April 30, 2004, AISI retained $667,782 for such services and reimbursed fees for the Institutional Class shares of $25.
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 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $1,009,233, $2,043,112, $362,759 and $4,637, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $93,325 in front-end sales commissions from the sale of Class A shares and $477, $3,976, $1,954 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.
FS-283
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional Class $16,395,571 $116,355,384 $ (93,554,921) $ -- $39,196,034 $ 98,843
--------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional Class 16,395,571 116,355,384 (93,554,921) -- 39,196,034 96,608
==========================================================================================================================
Subtotal $32,791,142 $232,710,768 $(187,109,842) $ -- $78,392,068 $195,451
__________________________________________________________________________________________________________________________
==========================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ --
--------------------------------------------
STIC Prime
Portfolio-Institutional Class --
============================================
Subtotal $ --
____________________________________________
============================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME*
----------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ 77,943,886 $108,984,784 $(113,075,051) $ -- $ 73,853,619 $ 80,965
----------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional Class 77,943,886 108,984,784 (113,075,051) -- 73,853,619 77,789
============================================================================================================================
Subtotal $155,887,772 $217,969,568 $(226,150,102) $ -- $147,707,238 $158,754
============================================================================================================================
Total $188,678,914 $450,680,336 $(413,259,944) $ -- $226,099,306 $354,205
____________________________________________________________________________________________________________________________
============================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ --
--------------------------------------------
STIC Prime
Portfolio-Institutional Class --
============================================
Subtotal $ --
============================================
Total $ --
____________________________________________
============================================
|
* Dividend income is net of fees paid to security lending counterparties of $563,106
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $7,659 and reductions in custodian fees of $188 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $7,847.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $3,962 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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.
FS-284
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $142,848,903 were on loan to brokers. The loans were secured by cash collateral of $147,707,238 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $158,754 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
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 six months ended April 30, 2004 was $303,294,347 and $381,943,758, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $262,876,624
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (27,935,699)
===========================================================
Net unrealized appreciation of investment
securities $234,940,925
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $968,156,832.
|
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 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 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
------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,983,346 $ 52,684,752 7,864,878 $ 109,808,336
------------------------------------------------------------------------------------------------------------------------
Class B 1,486,273 24,715,949 2,057,426 27,535,873
------------------------------------------------------------------------------------------------------------------------
Class C 636,329 10,601,974 834,828 11,240,012
------------------------------------------------------------------------------------------------------------------------
Class R 92,087 1,615,707 74,458 986,707
------------------------------------------------------------------------------------------------------------------------
Institutional Class 28 500 -0- -0-
========================================================================================================================
Issued as reinvestment of dividends:
Class A 727,482 12,170,778 -- --
------------------------------------------------------------------------------------------------------------------------
Class B 564,077 8,923,705 -- --
------------------------------------------------------------------------------------------------------------------------
Class C 96,098 1,519,308 -- --
------------------------------------------------------------------------------------------------------------------------
Class R 1,810 30,198 -- --
------------------------------------------------------------------------------------------------------------------------
Institutional Class 14 242 -- --
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 299,674 5,318,529 340,670 4,868,315
------------------------------------------------------------------------------------------------------------------------
Class B (317,297) (5,318,529) (358,616) (4,868,315)
========================================================================================================================
Reacquired:
Class A (3,439,190) (60,288,663) (11,106,766) (154,971,927)
------------------------------------------------------------------------------------------------------------------------
Class B (2,252,546) (37,392,305) (5,230,794) (68,520,455)
------------------------------------------------------------------------------------------------------------------------
Class C (567,228) (9,384,407) (1,117,790) (14,660,464)
------------------------------------------------------------------------------------------------------------------------
Class R (10,077) (177,125) (5,766) (84,463)
========================================================================================================================
300,880 $ 5,020,613 (6,647,472) $ (88,666,381)
________________________________________________________________________________________________________________________
========================================================================================================================
|
FS-285
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------
2004 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24 $ 12.89
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.08)(a) (0.04)(a) (0.04) (0.13) (0.10)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.34 3.94 (1.85) (4.27) 6.68 2.45
============================================================================================================================
Total from investment operations 1.32 3.86 (1.89) (4.31) 6.55 2.35
============================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) -- --
============================================================================================================================
Net asset value, end of period $ 17.56 $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 8.03% 30.16% (12.87)% (21.76)% 42.98% 18.23%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $585,200 $545,691 $456,268 $576,660 $759,838 $579,514
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 1.36%(c) 1.53% 1.38% 1.33% 1.28% 1.38%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.19)%(c) (0.56)% (0.29)% (0.21)% (0.60)% (0.70)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 30% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$579,873,452.
(d) Not annualized for periods less than one year.
CLASS B
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------
2004 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90 $ 12.70
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.16)(a) (0.14)(a) (0.15) (0.26) (0.20)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.26 3.74 (1.75) (4.12) 6.52 2.40
============================================================================================================================
Total from investment operations 1.19 3.58 (1.89) (4.27) 6.26 2.20
============================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) -- --
============================================================================================================================
Net asset value, end of period $ 16.56 $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 7.64% 29.32% (13.40)% (22.29)% 42.01% 17.32%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $403,059 $392,382 $346,456 $454,018 $617,576 $451,508
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 2.01%(c) 2.18% 2.03% 1.99% 1.99% 2.12%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.84)%(c) (1.21)% (0.94)% (0.87)% (1.30)% (1.44)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 30% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$410,867,647.
(d) Not annualized for periods less than one year.
FS-286
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------
2004 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89 $ 12.69
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.16)(a) (0.14)(a) (0.14) (0.25) (0.20)(a)
-----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.26 3.74 (1.76) (4.12) 6.51 2.40
=======================================================================================================================
Total from investment operations 1.19 3.58 (1.90) (4.26) 6.26 2.20
=======================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) -- --
=======================================================================================================================
Net asset value, end of period $ 16.55 $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 7.64% 29.34% (13.48)% (22.24)% 42.04% 17.34%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $74,448 $68,356 $56,298 $66,127 $82,982 $53,832
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets 2.01%(c) 2.18% 2.03% 1.99% 1.99% 2.12%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.84)%(c) (1.21)% (0.94)% (0.87)% (1.30)% (1.44)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(d) 30% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$72,950,442.
(d) Not annualized for periods less than one year.
CLASS R
------------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.62 $12.79 $ 16.62
--------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.10)(a) (0.03)(a)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.32 3.93 (3.80)
==============================================================================================================
Total from investment operations 1.30 3.83 (3.83)
==============================================================================================================
Less distributions from net realized gains (0.42) -- --
==============================================================================================================
Net asset value, end of period $17.50 $16.62 $ 12.79
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 7.92% 29.95% (23.05)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,682 $1,154 $ 10
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets 1.51%(c) 1.68% 1.54%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.34)%(c) (0.71)% (0.44)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 30% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$1,864,779.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-287
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL
---------------------------------------------
MARCH 15, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.83 $12.84 $ 17.25
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 0.01(a) 0.02(a)
-----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.35 3.98 (4.43)
===========================================================================================================
Total from investment operations 1.38 3.99 (4.41)
===========================================================================================================
Less distributions from net realized gains (0.42) -- --
===========================================================================================================
Net asset value, end of period $17.79 $16.83 $ 12.84
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) 8.31% 31.08% (25.57)%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 11 $ 10 $ 7
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets
With fee waivers and expense reimbursements 0.87%(c) 0.87% 0.84%(d)
-----------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 1.34%(c) 1.25% 0.99%(d)
===========================================================================================================
Ratio of net investment income to average net assets 0.30%(c) 0.10% 0.25%(d)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(e) 30% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of $10,787.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida
FS-288
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $46,241 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the
FS-289
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-290
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-94.11%
ADVERTISING-0.75%
Omnicom Group Inc. 303,500 $ 24,131,285
===========================================================================
AEROSPACE & DEFENSE-1.08%
Northrop Grumman Corp. 350,000 34,737,500
===========================================================================
APPAREL RETAIL-1.03%
Limited Brands 1,600,000 33,024,000
===========================================================================
APPLICATION SOFTWARE-0.83%
SAP A.G.-ADR (Germany)(a) 712,000 26,543,360
===========================================================================
BREWERS-1.34%
Heineken N.V. (Netherlands)(b) 1,022,350 42,917,296
===========================================================================
BUILDING PRODUCTS-2.07%
American Standard Cos. Inc.(c) 319,000 33,555,610
---------------------------------------------------------------------------
Masco Corp. 1,174,500 32,897,745
===========================================================================
66,453,355
===========================================================================
COMMUNICATIONS EQUIPMENT-0.44%
Nokia Oyj-ADR (Finland) 1,000,000 14,010,000
===========================================================================
COMPUTER HARDWARE-1.40%
International Business Machines Corp. 510,000 44,966,700
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.96%
Automatic Data Processing, Inc. 775,000 33,952,750
---------------------------------------------------------------------------
First Data Corp. 1,345,000 61,049,550
===========================================================================
95,002,300
===========================================================================
DEPARTMENT STORES-1.41%
Kohl's Corp.(c) 1,081,700 45,204,243
===========================================================================
DIVERSIFIED BANKS-2.64%
Bank of America Corp. 740,500 59,602,845
---------------------------------------------------------------------------
Wachovia Corp. 554,850 25,384,387
===========================================================================
84,987,232
===========================================================================
DIVERSIFIED CHEMICALS-1.05%
Dow Chemical Co. (The) 850,000 33,736,500
===========================================================================
ELECTRIC UTILITIES-1.75%
FPL Group, Inc. 430,000 27,356,600
---------------------------------------------------------------------------
TXU Corp. 850,000 29,019,000
===========================================================================
56,375,600
===========================================================================
|
---------------------------------------------------------------------------
MARKET
SHARES VALUE
ELECTRICAL COMPONENTS & EQUIPMENT-0.98%
Emerson Electric Co. 525,000 $ 31,615,500
===========================================================================
ENVIRONMENTAL SERVICES-1.47%
Waste Management, Inc. 1,660,000 47,144,000
===========================================================================
FOOD RETAIL-3.11%
Kroger Co. (The)(c) 3,460,000 60,550,000
---------------------------------------------------------------------------
Safeway Inc.(a) 1,720,000 39,474,000
===========================================================================
100,024,000
===========================================================================
HEALTH CARE FACILITIES-1.29%
HCA Inc. 1,023,900 41,601,057
===========================================================================
HOUSEHOLD PRODUCTS-1.04%
Kimberly-Clark Corp. 513,000 33,575,850
===========================================================================
HOUSEWARES & SPECIALTIES-1.47%
Newell Rubbermaid Inc. 2,000,000 47,280,000
===========================================================================
HYPERMARKETS & SUPER CENTERS-0.89%
Wal-Mart Stores, Inc. 500,000 28,500,000
===========================================================================
INDUSTRIAL CONGLOMERATES-3.35%
General Electric Co. 1,434,500 42,963,275
---------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 2,360,000 64,782,000
===========================================================================
107,745,275
===========================================================================
INDUSTRIAL MACHINERY-3.82%
Dover Corp. 1,555,800 62,278,674
---------------------------------------------------------------------------
Illinois Tool Works Inc. 701,000 60,433,210
===========================================================================
122,711,884
===========================================================================
INTEGRATED OIL & GAS-7.26%
Amerada Hess Corp.(a) 431,500 30,692,595
---------------------------------------------------------------------------
BP PLC-ADR (United Kingdom) 1,146,000 60,623,400
---------------------------------------------------------------------------
ChevronTexaco Corp. 342,500 31,338,750
---------------------------------------------------------------------------
ConocoPhillips 438,300 31,250,790
---------------------------------------------------------------------------
Exxon Mobil Corp. 1,135,700 48,324,035
---------------------------------------------------------------------------
Murphy Oil Corp. 454,900 31,160,650
===========================================================================
233,390,220
===========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.10%
ALLTEL Corp. 700,000 35,238,000
===========================================================================
|
FS-291
MARKET
SHARES VALUE
---------------------------------------------------------------------------
INTERNET RETAIL-1.06%
IAC/InterActiveCorp.(c) 1,070,000 $ 34,100,900
===========================================================================
INVESTMENT BANKING & BROKERAGE-0.93%
Morgan Stanley 582,250 29,921,828
===========================================================================
LIFE & HEALTH INSURANCE-0.98%
Prudential Financial, Inc. 716,200 31,469,828
===========================================================================
OFFICE ELECTRONICS-0.15%
Xerox Corp.(c) 371,300 4,986,559
===========================================================================
OIL & GAS DRILLING-0.96%
GlobalSantaFe Corp. (Cayman Islands) 1,172,300 30,913,551
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.06%
Baker Hughes Inc. 930,000 34,112,400
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.43%
Citigroup Inc. 920,000 44,242,800
---------------------------------------------------------------------------
Principal Financial Group, Inc. 955,000 33,711,500
===========================================================================
77,954,300
===========================================================================
PACKAGED FOODS & MEATS-9.34%
Campbell Soup Co. 2,212,000 61,117,560
---------------------------------------------------------------------------
General Mills, Inc. 1,880,000 91,650,000
---------------------------------------------------------------------------
Kellogg Co. 1,040,000 44,616,000
---------------------------------------------------------------------------
Kraft Foods Inc.-Class A 1,600,000 52,656,000
---------------------------------------------------------------------------
Sara Lee Corp. 2,165,000 49,968,200
===========================================================================
300,007,760
===========================================================================
PAPER PRODUCTS-1.31%
Georgia-Pacific Corp. 1,200,000 42,120,000
===========================================================================
PHARMACEUTICALS-13.31%
Abbott Laboratories 790,000 34,775,800
---------------------------------------------------------------------------
Bristol-Myers Squibb Co.(a) 1,635,000 41,038,500
---------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (United Kingdom)(a) 1,430,000 60,060,000
---------------------------------------------------------------------------
Johnson & Johnson 935,000 50,518,050
---------------------------------------------------------------------------
Merck & Co. Inc. 1,320,000 62,040,000
---------------------------------------------------------------------------
Pfizer Inc. 2,495,000 89,221,200
---------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 509,000 31,334,040
---------------------------------------------------------------------------
Wyeth 1,540,000 58,627,800
===========================================================================
427,615,390
===========================================================================
PROPERTY & CASUALTY INSURANCE-2.07%
ACE Ltd. (Cayman Islands) 750,000 32,880,000
---------------------------------------------------------------------------
|
---------------------------------------------------------------------------
MARKET
SHARES VALUE
PROPERTY & CASUALTY INSURANCE-(CONTINUED)
St. Paul Travelers Cos., Inc. (The) 828,122 $ 33,679,722
===========================================================================
66,559,722
===========================================================================
PUBLISHING-2.57%
Gannett Co., Inc. 450,000 39,006,000
---------------------------------------------------------------------------
New York Times Co. (The)-Class A 952,900 43,652,349
===========================================================================
82,658,349
===========================================================================
RAILROADS-1.89%
Norfolk Southern Corp. 1,334,000 31,775,880
---------------------------------------------------------------------------
Union Pacific Corp. 490,000 28,875,700
===========================================================================
60,651,580
===========================================================================
REGIONAL BANKS-1.50%
BB&T Corp. 709,300 24,463,757
---------------------------------------------------------------------------
SunTrust Banks, Inc. 351,150 23,895,758
===========================================================================
48,359,515
===========================================================================
SEMICONDUCTORS-2.84%
Intel Corp. 1,489,500 38,324,835
---------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan)(c) 2,447,280 23,322,578
---------------------------------------------------------------------------
Xilinx, Inc.(c) 878,000 29,527,140
===========================================================================
91,174,553
===========================================================================
SYSTEMS SOFTWARE-5.26%
Computer Associates International, Inc. 2,299,000 61,636,190
---------------------------------------------------------------------------
Microsoft Corp. 3,287,000 85,363,390
---------------------------------------------------------------------------
Oracle Corp.(c) 1,960,000 21,991,200
===========================================================================
168,990,780
===========================================================================
THRIFTS & MORTGAGE FINANCE-1.92%
Washington Mutual, Inc. 1,564,560 61,628,018
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,682,858,826) 3,024,140,190
===========================================================================
MONEY MARKET FUNDS-6.28%
Liquid Assets Portfolio-Institutional
Class(d) 100,899,593 100,899,593
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 100,899,593 100,899,593
===========================================================================
Total Money Market Funds
(Cost $201,799,186) 201,799,186
===========================================================================
TOTAL INVESTMENTS-100.39% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,884,658,012) 3,225,939,376
===========================================================================
|
FS-292
MARKET
SHARES VALUE
---------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.52%
Liquid Assets Portfolio-Institutional
Class(d)(e) 48,907,900 $ 48,907,900
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $48,907,900) 48,907,900
===========================================================================
TOTAL INVESTMENTS-101.91%
(Cost $2,933,565,912) 3,274,847,276
===========================================================================
OTHER ASSETS LESS LIABILITIES-(1.91%) (61,240,289)
===========================================================================
NET ASSETS-100.00% $3,213,606,987
___________________________________________________________________________
===========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(b) Security fair valued in accordance with the procedures established by the
Board of Trustees. The market value of this security at 04/30/04 represented
1.31% of the Fund's total investments. See Note 1A.
(c) Non-income producing security.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-293
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$2,682,858,826)* $3,024,140,190
------------------------------------------------------------
Investments in affiliated money market funds
(cost $250,707,086) 250,707,086
============================================================
Total investments (cost $2,933,565,912) 3,274,847,276
============================================================
Receivables for:
Investments sold 13,939,710
------------------------------------------------------------
Fund shares sold 835,614
------------------------------------------------------------
Dividends 3,257,029
------------------------------------------------------------
Investments matured (Note 9) 303,500
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 216,373
------------------------------------------------------------
Other assets 107,059
============================================================
Total assets 3,293,506,561
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 21,808,254
------------------------------------------------------------
Fund shares reacquired 5,232,685
------------------------------------------------------------
Dividends 103
------------------------------------------------------------
Deferred compensation and retirement plans 417,829
------------------------------------------------------------
Collateral upon return of securities
loaned 48,907,900
------------------------------------------------------------
Accrued distribution fees 1,538,419
------------------------------------------------------------
Accrued trustees' fees 2,487
------------------------------------------------------------
Accrued transfer agent fees 1,875,802
------------------------------------------------------------
Accrued operating expenses 116,095
============================================================
Total liabilities 79,899,574
============================================================
Net assets applicable to shares outstanding $3,213,606,987
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,583,718,909
------------------------------------------------------------
Undistributed net investment income 473,424
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (711,851,912)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 341,266,566
============================================================
$3,213,606,987
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,991,308,219
____________________________________________________________
============================================================
Class B $1,056,074,975
____________________________________________________________
============================================================
Class C $ 160,081,850
____________________________________________________________
============================================================
Class R $ 2,280,447
____________________________________________________________
============================================================
Institutional Class $ 3,861,496
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 165,321,427
____________________________________________________________
============================================================
Class B 91,558,080
____________________________________________________________
============================================================
Class C 13,839,633
____________________________________________________________
============================================================
Class R 190,178
____________________________________________________________
============================================================
Institutional Class 312,200
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 12.05
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.05 divided by
94.50%) $ 12.75
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.53
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.57
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 11.99
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.37
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $44,535,649 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-294
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $15,743) $ 27,605,306
--------------------------------------------------------------------------
Dividends from affiliated money market funds* 1,015,049
--------------------------------------------------------------------------
Interest 865
==========================================================================
Total investment income 28,621,220
==========================================================================
EXPENSES:
Advisory fees 10,508,124
--------------------------------------------------------------------------
Administrative services fees 293,474
--------------------------------------------------------------------------
Custodian fees 87,887
--------------------------------------------------------------------------
Distribution fees:
Class A 3,023,126
--------------------------------------------------------------------------
Class B 5,677,055
--------------------------------------------------------------------------
Class C 825,780
--------------------------------------------------------------------------
Class R 5,243
--------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 4,277,133
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 705
--------------------------------------------------------------------------
Trustees' fees 27,581
--------------------------------------------------------------------------
Other 585,178
==========================================================================
Total expenses 25,311,286
==========================================================================
Less: Fees waived and expense offset arrangements (50,235)
==========================================================================
Net expenses 25,261,051
==========================================================================
Net investment income 3,360,169
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 240,519,753
--------------------------------------------------------------------------
Foreign currencies 60,833
==========================================================================
240,580,586
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 26,208,976
--------------------------------------------------------------------------
Foreign currencies (14,799)
==========================================================================
26,194,177
==========================================================================
Net gain from investment securities and foreign currencies 266,774,763
==========================================================================
Net increase in net assets resulting from operations $270,134,932
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-295
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,360,169 $ 3,496,816
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 240,580,586 (177,091,373)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 26,194,177 649,909,999
==============================================================================================
Net increase in net assets resulting from operations 270,134,932 476,315,442
==============================================================================================
Distributions to shareholders from net investment income:
Class A (4,234,921) --
----------------------------------------------------------------------------------------------
Class R (2,667) --
----------------------------------------------------------------------------------------------
Institutional Class (14,410) --
==============================================================================================
Decrease in net assets resulting from distributions (4,251,998) --
==============================================================================================
Share transactions-net:
Class A (178,360,996) (380,938,708)
----------------------------------------------------------------------------------------------
Class B (185,399,007) (215,082,650)
----------------------------------------------------------------------------------------------
Class C (16,839,752) (29,277,194)
----------------------------------------------------------------------------------------------
Class R 410,396 1,521,693
----------------------------------------------------------------------------------------------
Institutional Class 1,634,268 339,875
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (378,555,091) (623,436,984)
==============================================================================================
Net increase (decrease) in net assets (112,672,157) (147,121,542)
==============================================================================================
NET ASSETS:
Beginning of period 3,326,279,144 3,473,400,686
==============================================================================================
End of period (including undistributed net investment
income of $473,424 and $1,365,253 for 2004 and 2003,
respectively) $3,213,606,987 $3,326,279,144
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-296
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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
FS-297
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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 FEES PAID TO 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 $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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $26,031. 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 six months ended April 30, 2004, AIM was paid $293,474 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 six months ended April 30, 2004, AISI retained $1,906,996 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 Institutional Class shares of the
FS-298
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to selected dealers and financial institutions who furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $3,023,126, $5,677,055, $825,780 and $5,243, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $145,237 in front-end sales commissions from the sale of Class A shares and $1,329, $10,522, $2,960 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, AIM Capital, AISI and/or AIM Distributors.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
MARKET PROCEEDS UNREALIZED MARKET REALIZED
VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND GAIN
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 98,974,452 $293,715,123 $(291,789,982) $-- $100,899,593 $ 508,020 $--
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 98,974,452 293,715,123 (291,789,982) -- 100,899,593 499,441 --
===================================================================================================================================
Subtotal $197,948,904 $587,430,246 $(583,579,964) $-- $201,799,186 $1,007,461 $--
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
MARKET PROCEEDS UNREALIZED MARKET REALIZED
VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND GAIN
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME* (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 22,552,000 $177,686,500 $(151,330,600) $-- $ 48,907,900 $ 7,588 $--
===================================================================================================================================
Total $220,500,904 $765,116,746 $(734,910,564) $-- $250,707,086 $1,015,049 $--
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $96,680.
FS-299
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $24,204 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $24,204.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $8,145 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $44,535,649 were on loan to brokers. The loans were secured by cash collateral of $48,907,900 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $7,588 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 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
_________________________________________________________
=========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-300
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 six months ended April 30, 2004 was $765,325,388 and $1,065,198,003, 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 $ 393,339,306
-----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (103,591,732)
=============================================================================
Net unrealized appreciation of investment securities $ 289,747,574
_____________________________________________________________________________
=============================================================================
Cost of investments for tax purposes is $2,985,099,702.
|
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 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 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
---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,487,255 $ 53,238,590 16,680,459 $ 167,057,570
---------------------------------------------------------------------------------------------------------------------------
Class B 2,291,367 25,982,296 8,128,480 78,572,729
---------------------------------------------------------------------------------------------------------------------------
Class C 781,494 8,912,883 2,035,003 19,657,080
---------------------------------------------------------------------------------------------------------------------------
Class R 54,909 640,504 182,932 1,841,485
---------------------------------------------------------------------------------------------------------------------------
Institutional Class 158,762 1,945,724 53,551 570,090
===========================================================================================================================
Issued as reinvestment of dividends:
Class A 345,514 3,966,581 -- --
---------------------------------------------------------------------------------------------------------------------------
Class R 233 2,667 -- --
---------------------------------------------------------------------------------------------------------------------------
Institutional Class 714 8,400 -- --
===========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 6,916,900 82,877,894 3,640,846 37,843,518
---------------------------------------------------------------------------------------------------------------------------
Class B (7,216,525) (82,877,894) (3,789,510) (37,843,518)
===========================================================================================================================
Reacquired:
Class A (27,013,482) (318,444,061) (58,788,618) (585,839,796)
---------------------------------------------------------------------------------------------------------------------------
Class B (11,328,233) (128,503,409) (26,845,101) (255,811,861)
---------------------------------------------------------------------------------------------------------------------------
Class C (2,260,937) (25,752,635) (5,102,475) (48,934,274)
---------------------------------------------------------------------------------------------------------------------------
Class R (19,611) (232,775) (29,999) (319,792)
---------------------------------------------------------------------------------------------------------------------------
Institutional Class (27,212) (319,856) (22,226) (230,215)
===========================================================================================================================
(32,828,852) $(378,555,091) (63,856,658) $(623,436,984)
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
FS-301
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16 $ 13.32
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 0.04(a) 0.01(b) (0.03) (0.04)(a) 0.02
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.92 1.51 (0.90) (6.70) 2.30 4.39
=================================================================================================================================
Total from investment operations 0.95 1.55 (0.89) (6.73) 2.26 4.41
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.02) -- -- -- -- (0.03)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.88) (1.35) (0.54)
=================================================================================================================================
Total distributions (0.02) -- -- (0.88) (1.35) (0.57)
=================================================================================================================================
Net asset value, end of period $ 12.05 $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.59% 16.20% (8.51)% (38.75)% 13.60% 34.05%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,991,308 $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 1.25%(d) 1.30% 1.22% 1.16% 1.06% 1.05%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.25%(d) 1.30% 1.22% 1.17% 1.08% 1.07%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.47%(d) 0.39% 0.09%(b) (0.24)% (0.20)% 0.11%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$2,026,490,775.
(e) Not annualized for periods less than one year.
FS-302
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97 $ 13.24
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.01) (0.03)(a) (0.08)(b) (0.13) (0.17)(a) (0.10)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.87 1.46 (0.86) (6.53) 2.27 4.37
=================================================================================================================================
Total from investment
operations 0.86 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 $ 11.53 $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.06% 15.48% (9.23)% (39.14)% 12.76% 33.06%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,056,075 $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 1.95%(d) 2.00% 1.92% 1.86% 1.80% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.95%(d) 2.00% 1.92% 1.87% 1.82% 1.82%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.23)%(d) (0.31)% (0.61)%(b) (0.94)% (0.94)% (0.64)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,141,649,429.
(e) Not annualized for periods less than one year.
FS-303
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01 $ 13.27
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.03)(a) (0.08)(b) (0.13) (0.17)(a) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.88 1.46 (0.86) (6.55) 2.28 4.37
=================================================================================================================================
Total from investment operations 0.87 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 $ 11.57 $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.13% 15.43% (9.21)% (39.14)% 12.78% 33.06%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $160,082 $163,859 $170,444 $248,533 $412,872 $138,467
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.95%(d) 2.00% 1.92% 1.86% 1.80% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.95%(d) 2.00% 1.92% 1.87% 1.82% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.23)%(d) (0.31)% (0.61)%(b) (0.94)% (0.94)% (0.64)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$166,063,485.
(e) Not annualized for periods less than one year.
FS-304
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
---------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.08 $ 9.56 $ 10.94
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.02 0.02(a) 0.00
-----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.91 1.50 (1.38)
===========================================================================================================
Total from investment operations 0.93 1.52 (1.38)
===========================================================================================================
Less dividends from net investment income (0.02) -- --
===========================================================================================================
Net asset value, end of period $11.99 $11.08 $ 9.56
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) 8.36% 15.90% (12.61)%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,280 $1,714 $ 16
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets: 1.45%(c) 1.50% 1.42%(d)
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of net investment income (loss) to average net assets 0.27%(c) 0.19% (0.11)%(d)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(e) 25% 28% 103%
___________________________________________________________________________________________________________
===========================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset value may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,108,528.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-305
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.45 $ 9.80 $10.67 $ 18.33 $17.33 $ 13.42
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08 0.09(a) 0.06(b) 0.04 0.52 0.09
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.92 1.56 (0.93) (6.82) 1.83 4.43
=================================================================================================================================
Total from investment operations 1.00 1.65 (0.87) (6.78) 2.35 4.52
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.08) -- -- -- -- (0.07)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.88) (1.35) (0.54)
=================================================================================================================================
Total distributions (0.08) -- -- (0.88) (1.35) (0.61)
=================================================================================================================================
Net asset value, end of period $12.37 $11.45 $ 9.80 $ 10.67 $18.33 $ 17.33
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.80% 16.84% (8.15)% (38.46)% 14.02% 34.61%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,861 $2,061 $1,457 $ 1,648 $3,234 $66,801
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.74%(d) 0.79% 0.79% 0.68% 0.66% 0.65%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.74%(d) 0.79% 0.83% 0.69% 0.68% 0.67%
=================================================================================================================================
Ratio of net investment income to average net assets 0.98%(d) 0.90% 0.52%(b) 0.25% 0.20% 0.51%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset value may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$2,763,186.
(e) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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.
FS-306
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
The NYAG and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $117,347 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the
FS-307
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-308
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.69%
ADVERTISING-2.08%
Lamar Advertising Co.(a) 3,000,000 $ 123,180,000
--------------------------------------------------------------------------
Omnicom Group Inc. 366,900 29,172,219
==========================================================================
152,352,219
==========================================================================
AIR FREIGHT & LOGISTICS-0.27%
Expeditors International of Washington, Inc. 500,000 20,095,000
==========================================================================
AIRLINES-0.78%
Southwest Airlines Co. 4,000,000 57,120,000
==========================================================================
APPAREL RETAIL-2.35%
Chico's FAS, Inc.(a) 800,000 32,584,000
--------------------------------------------------------------------------
Foot Locker, Inc. 1,000,000 24,000,000
--------------------------------------------------------------------------
Gap, Inc. (The)(b) 3,000,000 66,030,000
--------------------------------------------------------------------------
TJX Cos., Inc. (The) 2,000,000 49,140,000
==========================================================================
171,754,000
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.58%
Coach, Inc.(a) 1,000,000 42,600,000
==========================================================================
APPLICATION SOFTWARE-1.09%
Citrix Systems, Inc.(a) 1,300,000 24,765,000
--------------------------------------------------------------------------
Intuit Inc.(a) 800,000 33,976,000
--------------------------------------------------------------------------
Mercury Interactive Corp.(a) 500,000 21,275,000
==========================================================================
80,016,000
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.93%
Northern Trust Corp. 750,000 31,710,000
--------------------------------------------------------------------------
State Street Corp. 750,000 36,600,000
==========================================================================
68,310,000
==========================================================================
BIOTECHNOLOGY-2.00%
Amgen Inc.(a) 744,700 41,904,269
--------------------------------------------------------------------------
Biogen Idec Inc.(a) 600,000 35,400,000
--------------------------------------------------------------------------
Genzyme Corp.(a) 824,600 35,919,576
--------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 544,600 33,128,018
==========================================================================
146,351,863
==========================================================================
BROADCASTING & CABLE TV-3.09%
Clear Channel Communications, Inc. 2,996,400 124,320,636
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
BROADCASTING & CABLE TV-(CONTINUED)
Univision Communications Inc.-Class A(a)(b) 2,137,500 $ 72,354,375
--------------------------------------------------------------------------
Westwood One, Inc.(a) 1,000,000 29,540,000
==========================================================================
226,215,011
==========================================================================
CASINOS & GAMING-1.17%
International Game Technology 750,000 28,305,000
--------------------------------------------------------------------------
MGM MIRAGE(a) 1,250,000 57,262,500
==========================================================================
85,567,500
==========================================================================
COMMUNICATIONS EQUIPMENT-4.22%
Avaya Inc.(a)(b) 1,500,000 20,520,000
--------------------------------------------------------------------------
Cisco Systems, Inc.(a) 7,000,000 146,090,000
--------------------------------------------------------------------------
Corning Inc.(a)(b) 3,500,000 38,605,000
--------------------------------------------------------------------------
Juniper Networks, Inc.(a)(b) 1,250,000 27,350,000
--------------------------------------------------------------------------
Nokia Oyj (Finland)(c) 1,960,400 27,396,956
--------------------------------------------------------------------------
Nortel Networks Corp. (Canada)(a) 13,000,000 48,620,000
==========================================================================
308,581,956
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.56%
Best Buy Co., Inc. 750,000 40,687,500
==========================================================================
COMPUTER HARDWARE-1.78%
Dell Inc.(a) 3,750,000 130,162,500
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.61%
EMC Corp.(a) 4,000,000 44,640,000
==========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.73%
Caterpillar Inc. 750,000 58,297,500
--------------------------------------------------------------------------
Deere & Co. 1,000,000 68,040,000
==========================================================================
126,337,500
==========================================================================
CONSUMER FINANCE-2.66%
American Express Co. 1,450,000 70,977,500
--------------------------------------------------------------------------
MBNA Corp. 3,500,000 85,330,000
--------------------------------------------------------------------------
SLM Corp. 1,000,000 38,310,000
==========================================================================
194,617,500
==========================================================================
|
FS-309
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES-1.76%
Fiserv, Inc.(a) 2,750,000 $ 100,540,000
--------------------------------------------------------------------------
Paychex, Inc. 750,000 27,960,000
==========================================================================
128,500,000
==========================================================================
DEPARTMENT STORES-1.07%
J.C. Penney Co., Inc. 1,250,000 42,325,000
--------------------------------------------------------------------------
Nordstrom, Inc. 1,000,000 35,630,000
==========================================================================
77,955,000
==========================================================================
DIVERSIFIED BANKS-0.55%
Bank of America Corp. 500,000 40,245,000
==========================================================================
DIVERSIFIED CAPITAL MARKETS-0.77%
J.P. Morgan Chase & Co. 1,500,000 56,400,000
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.33%
Apollo Group, Inc.-Class A(a) 700,000 63,616,000
--------------------------------------------------------------------------
Cintas Corp. 750,000 33,720,000
==========================================================================
97,336,000
==========================================================================
DRUG RETAIL-0.71%
Walgreen Co. 1,500,000 51,720,000
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.45%
Rockwell Automation, Inc. 1,000,000 32,690,000
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.74%
Agilent Technologies, Inc.(a) 2,000,000 54,020,000
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.33%
Molex Inc. 802,400 23,895,472
==========================================================================
EMPLOYMENT SERVICES-1.12%
Robert Half International Inc.(a) 3,007,400 82,011,798
==========================================================================
FOOD DISTRIBUTORS-0.55%
Sysco Corp. 1,060,800 40,575,600
==========================================================================
FOOD RETAIL-0.38%
Whole Foods Market, Inc. 350,000 27,996,500
==========================================================================
GENERAL MERCHANDISE STORES-0.86%
Dollar General Corp. 1,500,000 28,140,000
--------------------------------------------------------------------------
Family Dollar Stores, Inc. 1,082,700 34,797,978
==========================================================================
62,937,978
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HEALTH CARE DISTRIBUTORS-1.44%
AmerisourceBergen Corp. 812,400 $ 47,029,836
--------------------------------------------------------------------------
Cardinal Health, Inc. 800,000 58,600,000
==========================================================================
105,629,836
==========================================================================
HEALTH CARE EQUIPMENT-5.85%
Biomet, Inc. 3,535,175 139,639,413
--------------------------------------------------------------------------
Boston Scientific Corp.(a) 2,161,400 89,028,066
--------------------------------------------------------------------------
Guidant Corp. 741,200 46,703,012
--------------------------------------------------------------------------
Medtronic, Inc. 815,700 41,160,222
--------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 500,000 38,130,000
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 918,900 73,374,165
==========================================================================
428,034,878
==========================================================================
HEALTH CARE SERVICES-1.90%
Caremark Rx, Inc.(a) 4,108,381 139,068,697
==========================================================================
HOME IMPROVEMENT RETAIL-0.84%
Lowe's Cos., Inc. 1,182,400 61,555,744
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.57%
Carnival Corp. (Panama)(b) 1,000,000 42,670,000
--------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. (Liberia)(b) 1,050,000 42,556,500
--------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 750,000 29,842,500
==========================================================================
115,069,000
==========================================================================
HOUSEHOLD PRODUCTS-0.91%
Procter & Gamble Co. (The) 629,400 66,559,050
==========================================================================
HYPERMARKETS & SUPER CENTERS-1.56%
Wal-Mart Stores, Inc. 2,000,000 114,000,000
==========================================================================
INDUSTRIAL CONGLOMERATES-1.15%
3M Co. 450,000 38,916,000
--------------------------------------------------------------------------
General Electric Co. 1,500,000 44,925,000
==========================================================================
83,841,000
==========================================================================
INDUSTRIAL MACHINERY-2.58%
Danaher Corp.(b) 500,000 46,260,000
--------------------------------------------------------------------------
Eaton Corp. 650,000 38,597,000
--------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 1,100,000 71,005,000
--------------------------------------------------------------------------
Parker Hannifin Corp. 600,000 33,174,000
==========================================================================
189,036,000
==========================================================================
INTERNET RETAIL-1.09%
eBay Inc.(a) 1,000,000 79,820,000
==========================================================================
|
FS-310
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES-0.86%
Yahoo! Inc.(a) 1,250,000 $ 63,075,000
==========================================================================
INVESTMENT BANKING & BROKERAGE-2.45%
Goldman Sachs Group, Inc. (The) 700,000 67,725,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 1,350,000 73,210,500
--------------------------------------------------------------------------
Morgan Stanley 750,000 38,542,500
==========================================================================
179,478,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.49%
Accenture Ltd.-Class A (Bermuda)(a) 1,500,000 35,655,000
==========================================================================
MANAGED HEALTH CARE-2.90%
Aetna Inc. 593,700 49,128,675
--------------------------------------------------------------------------
Coventry Health Care, Inc.(a) 499,000 20,878,160
--------------------------------------------------------------------------
UnitedHealth Group Inc. 852,000 52,380,960
--------------------------------------------------------------------------
WellPoint Health Networks Inc.(a) 806,000 90,022,140
==========================================================================
212,409,935
==========================================================================
MOTORCYCLE MANUFACTURERS-0.38%
Harley-Davidson, Inc. 500,000 28,160,000
==========================================================================
MOVIES & ENTERTAINMENT-1.29%
Pixar(a)(b) 250,000 17,075,000
--------------------------------------------------------------------------
Viacom Inc.-Class B 2,000,000 77,300,000
==========================================================================
94,375,000
==========================================================================
MULTI-LINE INSURANCE-0.98%
American International Group, Inc. 1,000,000 71,650,000
==========================================================================
OIL & GAS DRILLING-1.30%
ENSCO International Inc. 1,219,000 33,364,030
--------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 800,000 35,488,000
--------------------------------------------------------------------------
Noble Corp. (Cayman Islands)(a) 700,000 26,012,000
==========================================================================
94,864,030
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.39%
BJ Services Co.(a) 869,600 38,697,200
--------------------------------------------------------------------------
Smith International, Inc.(a)(b) 650,000 35,587,500
--------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 625,000 27,175,000
==========================================================================
101,459,700
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.59%
Devon Energy Corp. 700,000 42,840,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-1.31%
Citigroup Inc. 2,000,000 $ 96,180,000
==========================================================================
PERSONAL PRODUCTS-0.70%
Gillette Co. (The) 1,250,000 51,150,000
==========================================================================
PHARMACEUTICALS-7.09%
Barr Pharmaceuticals Inc.(a) 852,600 35,314,692
--------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 608,900 39,261,872
--------------------------------------------------------------------------
Johnson & Johnson 1,000,000 54,030,000
--------------------------------------------------------------------------
Lilly (Eli) & Co. 575,900 42,507,179
--------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 1,333,500 57,233,820
--------------------------------------------------------------------------
Pfizer Inc. 4,250,000 151,980,000
--------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel)(b) 2,244,800 138,189,888
==========================================================================
518,517,451
==========================================================================
PUBLISHING-0.59%
Gannett Co., Inc. 500,000 43,340,000
==========================================================================
RESTAURANTS-1.40%
McDonald's Corp. 1,000,000 27,230,000
--------------------------------------------------------------------------
Outback Steakhouse, Inc. 571,000 25,084,030
--------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(a)(b) 428,034 20,913,741
--------------------------------------------------------------------------
Wendy's International, Inc. 749,300 29,222,700
==========================================================================
102,450,471
==========================================================================
SEMICONDUCTOR EQUIPMENT-3.05%
Applied Materials, Inc.(a) 3,224,100 58,775,343
--------------------------------------------------------------------------
KLA-Tencor Corp.(a)(b) 1,322,800 55,121,076
--------------------------------------------------------------------------
Lam Research Corp.(a) 4,000,000 88,560,000
--------------------------------------------------------------------------
Teradyne, Inc.(a) 1,000,000 20,380,000
==========================================================================
222,836,419
==========================================================================
SEMICONDUCTORS-6.28%
Analog Devices, Inc. 2,750,000 117,150,000
--------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 500,000 18,880,000
--------------------------------------------------------------------------
Linear Technology Corp. 2,000,000 71,260,000
--------------------------------------------------------------------------
Maxim Integrated Products, Inc. 1,500,000 68,985,000
--------------------------------------------------------------------------
Microchip Technology Inc. 5,068,952 142,032,035
--------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan)(b) 4,290,064 40,884,310
==========================================================================
459,191,345
==========================================================================
SPECIALTY STORES-3.66%
AutoZone, Inc.(a) 500,000 43,785,000
--------------------------------------------------------------------------
|
FS-311
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SPECIALTY STORES-(CONTINUED)
Bed Bath & Beyond Inc.(a) 2,500,000 $ 92,800,000
--------------------------------------------------------------------------
Staples, Inc. 2,000,000 51,520,000
--------------------------------------------------------------------------
Tiffany & Co. 1,000,000 39,000,000
--------------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 1,250,000 40,600,000
==========================================================================
267,705,000
==========================================================================
SYSTEMS SOFTWARE-3.57%
Microsoft Corp. 7,100,000 184,387,000
--------------------------------------------------------------------------
Oracle Corp.(a) 4,438,800 49,803,336
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 1,000,000 26,670,000
==========================================================================
260,860,336
==========================================================================
TECHNOLOGY DISTRIBUTORS-1.50%
CDW Corp. 1,755,800 109,719,942
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.50%
Nextel Communications, Inc.-Class A(a) 1,820,000 43,425,200
--------------------------------------------------------------------------
Vodafone Group PLC (United Kingdom)(c) 27,345,190 66,309,588
==========================================================================
109,734,788
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $5,513,711,141) 7,219,958,519
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MONEY MARKET FUNDS-1.33%
Liquid Assets Portfolio-Institutional
Class(d) 48,665,290 $ 48,665,290
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 48,665,290 48,665,290
==========================================================================
Total Money Market Funds (Cost
$97,330,580) 97,330,580
==========================================================================
TOTAL INVESTMENTS-100.02%
(excluding investments purchased with cash
collateral from securities loaned) (Cost
$5,611,041,721) 7,317,289,099
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.42%
Liquid Assets Portfolio-Institutional
Class(d)(e) 78,924,885 78,924,884
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 24,938,484 24,938,485
==========================================================================
Total Money Market Funds
(purchased with cash collateral from
securities loaned)
(Cost $103,863,369) 103,863,369
==========================================================================
TOTAL INVESTMENTS-101.44% (Cost
$5,714,905,090) 7,421,152,468
==========================================================================
OTHER ASSETS LESS LIABILITIES-(1.44%) (105,028,687)
==========================================================================
NET ASSETS-100.00% $7,316,123,781
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees. The aggregate market value of these securities at
04/30/04 was $93,706,544, which represented 1.26% of the Fund's total
investments. See Note 1A.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-312
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$5,513,711,141)* $ 7,219,958,519
------------------------------------------------------------
Investments in affiliated money market
funds (cost $201,193,949) 201,193,949
============================================================
Total investments (cost
$5,714,905,090) 7,421,152,468
============================================================
Foreign currencies, at value (cost
$598,783) 597,633
------------------------------------------------------------
Receivables for:
Investments sold 47,339,710
------------------------------------------------------------
Fund shares sold 2,968,178
------------------------------------------------------------
Dividends 3,066,733
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 459,515
------------------------------------------------------------
Other assets 111,453
============================================================
Total assets 7,475,695,690
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 21,100,000
------------------------------------------------------------
Fund shares reacquired 26,558,087
------------------------------------------------------------
Deferred compensation and retirement
plans 981,167
------------------------------------------------------------
Collateral upon return of securities
loaned 103,863,369
------------------------------------------------------------
Accrued distribution fees 2,285,475
------------------------------------------------------------
Accrued trustees' fees 5,167
------------------------------------------------------------
Accrued transfer agent fees 3,968,023
------------------------------------------------------------
Accrued operating expenses 810,621
============================================================
Total liabilities 159,571,909
============================================================
Net assets applicable to shares outstanding $ 7,316,123,781
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 8,157,426,098
------------------------------------------------------------
Undistributed net investment income (loss) (27,706,634)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (2,519,841,911)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,706,246,228
============================================================
$ 7,316,123,781
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 6,304,693,341
____________________________________________________________
============================================================
Class B $ 667,155,485
____________________________________________________________
============================================================
Class C $ 183,929,612
____________________________________________________________
============================================================
Class R $ 5,251,299
____________________________________________________________
============================================================
Institutional Class $ 155,094,044
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 300,112,182
____________________________________________________________
============================================================
Class B 33,747,686
____________________________________________________________
============================================================
Class C 9,306,626
____________________________________________________________
============================================================
Class R 250,079
____________________________________________________________
============================================================
Institutional Class 6,846,580
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.01
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.01 divided by
94.50%) $ 22.23
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.77
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.76
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.00
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 22.65
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $100,144,022 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-313
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $235,961) $ 22,893,889
---------------------------------------------------------------------------
Dividends from affiliated money market funds* 753,373
===========================================================================
Total investment income 23,647,262
===========================================================================
EXPENSES:
Advisory fees 24,559,822
---------------------------------------------------------------------------
Administrative services fees 360,922
---------------------------------------------------------------------------
Custodian fees 189,005
---------------------------------------------------------------------------
Distribution fees:
Class A 10,134,379
---------------------------------------------------------------------------
Class B 3,508,665
---------------------------------------------------------------------------
Class C 974,141
---------------------------------------------------------------------------
Class R 11,025
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 9,863,873
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 35,319
---------------------------------------------------------------------------
Trustees' fees 56,977
---------------------------------------------------------------------------
Other 1,245,629
===========================================================================
Total expenses 50,939,757
===========================================================================
Less: Fees waived and expense offset arrangements (430,660)
===========================================================================
Net expenses 50,509,097
===========================================================================
Net investment income (loss) (26,861,835)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 401,701,102
---------------------------------------------------------------------------
Foreign currencies (533,388)
---------------------------------------------------------------------------
Option contracts written 279,661
===========================================================================
401,447,375
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (210,663,670)
---------------------------------------------------------------------------
Foreign currencies (1,150)
===========================================================================
(210,664,820)
===========================================================================
Net gain from investment securities, foreign currencies and
option contracts 190,782,555
===========================================================================
Net increase in net assets resulting from operations $ 163,920,720
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-314
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
-----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (26,861,835) $ (54,584,186)
-----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 401,447,375 (454,745,158)
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (210,664,820) 1,834,190,965
===============================================================================================
Net increase in net assets resulting from operations 163,920,720 1,324,861,621
===============================================================================================
Share transactions-net:
Class A (665,538,950) (1,112,282,235)
-----------------------------------------------------------------------------------------------
Class B (33,206,804) (46,666,906)
-----------------------------------------------------------------------------------------------
Class C (13,031,436) (22,091,083)
-----------------------------------------------------------------------------------------------
Class R 2,411,203 2,235,274
-----------------------------------------------------------------------------------------------
Institutional Class (2,633,469) 5,433,008
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (711,999,456) (1,173,371,942)
===============================================================================================
Net increase (decrease) in net assets (548,078,736) 151,489,679
===============================================================================================
NET ASSETS:
Beginning of period 7,864,202,517 7,712,712,838
===============================================================================================
End of period (including undistributed net investment
income (loss) of $(27,706,634) and $(844,799) for 2004
and 2003, respectively) $7,316,123,781 $ 7,864,202,517
_______________________________________________________________________________________________
===============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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
FS-315
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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
FS-316
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 FEES PAID TO 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 $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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). Voluntary fee waivers or reimbursements may be modified or discontinued with approval by the Board of Trustees without further notice to investors. For the six months ended April 30, 2004, AIM waived fees of $373,954. 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 six months ended April 30, 2004, AIM was paid $360,922 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 six months ended April 30, 2004, AISI retained $4,039,722 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 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to selected dealers and financial institutions who furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $10,134,379, $3,508,665, $974,141 and $11,025, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $452,090 in front-end sales commissions from the sale of Class A shares and $7,551, $11,905, $5,971 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, AIM Capital, AISI and/or AIM Distributors.
FS-317
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 95,933,174 $ 546,717,783 $ (593,985,667) $ -- $ 48,665,290 $338,362 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 95,933,174 546,717,783 (593,985,667) -- 48,665,290 328,631 --
====================================================================================================================================
Subtotal $191,866,348 $1,093,435,566 $(1,187,971,334) $ -- $ 97,330,580 $666,993 $ --
====================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $155,180,095 $1,243,005,077 $(1,319,260,288) $ -- $ 78,924,884 $ 79,172 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 24,938,485 -- -- -- 24,938,485 7,208 --
====================================================================================================================================
Subtotal 180,118,580 1,243,005,077 (1,319,260,288) -- 103,863,369 86,380 --
====================================================================================================================================
Total $371,984,928 $2,336,440,643 $(2,507,231,622) $ -- $201,193,949 $753,373 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $1,352,982.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $56,216 and reductions in custodian fees of $490 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $56,706.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of
$15,657 for services rendered by Kramer, Levin, Naftalis & Frankel
NOTE 5--TRUSTEES' FEES (CONTINUED)
LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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.
FS-318
NOTE 6--BORROWINGS (CONTINUED)
During the six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $100,144,022 were on loan to brokers. The loans were secured by cash collateral of $103,863,369 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $86,380 for securities lending transactions.
NOTE 8--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
--------------------------------------------------------------------------------
CALL OPTION CONTRACTS
--------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------------------------------------------------------------------------------
Beginning of period -- $ --
--------------------------------------------------------------------------------
Written 3,750 282,210
--------------------------------------------------------------------------------
Closed (425) (28,898)
--------------------------------------------------------------------------------
Expired (3,325) (253,312)
================================================================================
End of period -- $ --
________________________________________________________________________________
================================================================================
|
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 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
______________________________________________________________________________
==============================================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--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 six months ended April 30, 2004 was $1,544,624,688 and $2,231,055,927, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 1,922,029,071
-------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (221,417,726)
===============================================================================
Net unrealized appreciation of investment securities $ 1,700,611,345
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $5,720,541,123.
|
FS-319
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 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 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
-----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 12,886,511 $ 278,214,801 40,892,692 $ 728,901,495
-----------------------------------------------------------------------------------------------------------------------------
Class B 1,727,660 35,131,825 4,399,643 74,587,779
-----------------------------------------------------------------------------------------------------------------------------
Class C 801,403 16,292,869 1,764,643 29,858,199
-----------------------------------------------------------------------------------------------------------------------------
Class R 145,151 3,137,656 163,302 2,916,332
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class 548,945 12,687,735 1,117,656 21,391,286
=============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 230,671 5,031,686 325,830 5,894,532
-----------------------------------------------------------------------------------------------------------------------------
Class B (244,793) (5,031,686) (344,006) (5,894,532)
=============================================================================================================================
Reacquired:
Class A (44,122,751) (948,785,437) (104,213,879) (1,847,078,262)
-----------------------------------------------------------------------------------------------------------------------------
Class B (3,112,504) (63,306,943) (6,899,964) (115,360,153)
-----------------------------------------------------------------------------------------------------------------------------
Class C (1,443,384) (29,324,305) (3,090,330) (51,949,282)
-----------------------------------------------------------------------------------------------------------------------------
Class R (33,595) (726,453) (37,857) (681,058)
-----------------------------------------------------------------------------------------------------------------------------
Institutional Class (655,632) (15,321,204) (833,861) (15,958,278)
=============================================================================================================================
(33,272,318) $(711,999,456) (66,756,131) $(1,173,371,942)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65 $ 26.37
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.12)(a) (0.15)(a) (0.12) (0.26) (0.17)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.47 3.53 (2.37) (16.24) 12.39 9.18
=================================================================================================================================
Total from investment
operations 0.40 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 $ 21.01 $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.94% 19.83% (12.78)% (43.10)% 36.56% 34.81%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $6,304,693 $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 1.22%(c) 1.29% 1.26% 1.14% 1.08% 1.10%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.23%(c) 1.30% 1.27% 1.17% 1.11% 1.12%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.62)%(c) (0.67)% (0.74)% (0.46)% (0.61)% (0.50)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 20% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$6,793,374,943.
(d) Not annualized for periods less than one year.
FS-320
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00 $ 26.11
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14) (0.23)(a) (0.27)(a) (0.28) (0.58)(a) (0.42)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.45 3.33 (2.26) (15.69) 12.14 9.04
=================================================================================================================================
Total from investment operations 0.31 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 $ 19.77 $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.59% 18.95% (13.39)% (43.49)% 35.51% 33.64%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $667,155 $688,587 $625,294 $818,343 $1,315,524 $589,718
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.92%(c) 1.99% 1.96% 1.86% 1.85% 1.98%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.93%(c) 2.00% 1.97% 1.89% 1.88% 2.00%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.32)%(c) (1.37)% (1.44)% (1.17)% (1.38)% (1.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 20% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$705,588,616.
(d) Not annualized for periods less than one year.
CLASS C
------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99 $ 26.10
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14) (0.23)(a) (0.27)(a) (0.29) (0.59)(a) (0.42)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.44 3.33 (2.25) (15.68) 12.15 9.04
=================================================================================================================================
Total from investment operations 0.30 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 $ 19.76 $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.54% 18.95% (13.35)% (43.51)% 35.52% 33.65
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $183,930 $193,585 $184,393 $258,786 $434,544 $161,490
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.92%(c) 1.99% 1.96% 1.86% 1.85% 1.98%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.93%(c) 2.00% 1.97% 1.89% 1.88% 2.00%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.32)%(c) (1.37)% (1.44)% (1.17)% (1.38)% (1.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 20% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$195,898,730.
(d) Not annualized for periods less than one year.
FS-321
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
---------------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $20.63 $17.26 $ 19.82
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.16)(a) (0.07)(a)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.44 3.53 (2.49)
=================================================================================================================
Total from investment operations 0.37 3.37 (2.56)
=================================================================================================================
Net asset value, end of period $21.00 $20.63 $ 17.26
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 1.79% 19.52% (12.92)%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,251 $2,857 $ 226
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.42%(c) 1.49% 1.53%(d)
-----------------------------------------------------------------------------------------------------------------
Without fee waivers 1.43%(c) 1.50% 1.54%(d)
=================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.87)% (1.01)%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 20% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$4,434,334.
(d) Annualized.
(e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01 $ 27.25
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.03)(a) (0.06) 0.01 (0.09) (0.01)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.49 3.80 (2.54) (17.14) 12.91 9.50
=================================================================================================================================
Total from investment operations 0.48 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 $ 22.65 $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.17% 20.49% (12.38)% (42.80)% 37.14% 35.46%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $155,094 $154,150 $122,746 $150,609 $288,097 $244,369
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.71%(c) 0.75% 0.80% 0.65% 0.65% 0.64%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.72%(c) 0.76% 0.81% 0.68% 0.68% 0.66%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.11)%(c) (0.13)% (0.28)% 0.03% (0.18)% (0.04)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 20% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$161,028,491.
(d) Not annualized for periods less than one year.
FS-322
NOTE 13--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $256,970 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment
FS-323
NOTE 13--LEGAL PROCEEDINGS (CONTINUED)
company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-324
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------------------
COMMON STOCKS--96.84%
AEROSPACE & DEFENSE--2.08%
General Dynamics Corp. 60 $ 5,617
------------------------------------------------------------------------------------
United Technologies Corp. 170 14,664
====================================================================================
20,281
====================================================================================
APPAREL RETAIL--1.12%
Foot Locker, Inc. 150 3,600
------------------------------------------------------------------------------------
Gap, Inc. (The) 230 5,062
------------------------------------------------------------------------------------
Limited Brands 110 2,270
====================================================================================
10,932
====================================================================================
APPAREL, ACCESSORIES & LUXURY GOODS--0.25%
Liz Claiborne, Inc. 70 2,457
====================================================================================
APPLICATION SOFTWARE--1.02%
Citrix Systems, Inc. (a) 170 3,238
------------------------------------------------------------------------------------
Intuit Inc. (a) 70 2,973
------------------------------------------------------------------------------------
Reynolds & Reynolds Co. (The)-Class A 130 3,713
====================================================================================
9,924
====================================================================================
ASSET MANAGEMENT & CUSTODY BANKS--0.18%
SEI Investments Co. 60 1,771
====================================================================================
AUTO PARTS & EQUIPMENT--0.79%
Autoliv, Inc. 180 7,655
====================================================================================
BIOTECHNOLOGY--0.98%
Amgen Inc. (a) 80 4,502
------------------------------------------------------------------------------------
Invitrogen Corp. (a) 70 5,056
====================================================================================
9,558
====================================================================================
BUILDING PRODUCTS--0.81%
Masco Corp. 280 7,843
====================================================================================
CASINOS & GAMING--0.27%
International Game Technology 70 2,642
====================================================================================
|
FS-325
MARKET
SHARES VALUE
------------------------------------------------------------------------------------
Cisco Systems, Inc. (a) 1,100 22,957
====================================================================================
COMPUTER & ELECTRONICS RETAIL--0.41%
Best Buy Co., Inc. 40 $ 2,170
------------------------------------------------------------------------------------
RadioShack Corp. 60 1,846
====================================================================================
4,016
====================================================================================
COMPUTER HARDWARE--2.34%
Dell Inc. (a) 560 19,438
------------------------------------------------------------------------------------
Hewlett-Packard Co. 170 3,349
====================================================================================
22,787
====================================================================================
CONSUMER FINANCE--3.62%
American Express Co. 300 14,685
------------------------------------------------------------------------------------
Capital One Financial Corp. 110 7,208
------------------------------------------------------------------------------------
MBNA Corp. 550 13,409
====================================================================================
35,302
====================================================================================
DATA PROCESSING & OUTSOURCED SERVICES--2.23%
Affiliated Computer Services, Inc.-Class A (a) 100 4,850
------------------------------------------------------------------------------------
Automatic Data Processing, Inc. 90 3,943
------------------------------------------------------------------------------------
First Data Corp. 180 8,170
------------------------------------------------------------------------------------
Paychex, Inc. 50 1,864
------------------------------------------------------------------------------------
SunGard Data Systems Inc. (a) 110 2,868
====================================================================================
21,695
====================================================================================
DEPARTMENT STORES--0.35%
Federated Department Stores, Inc. 70 3,430
====================================================================================
DIVERSIFIED BANKS--6.41%
Bank of America Corp. 230 18,513
------------------------------------------------------------------------------------
Bank One Corp. 90 4,443
------------------------------------------------------------------------------------
U.S. Bancorp 530 13,589
------------------------------------------------------------------------------------
Wachovia Corp. 320 14,640
------------------------------------------------------------------------------------
Wells Fargo & Co. 200 11,292
====================================================================================
62,477
====================================================================================
DIVERSIFIED CAPITAL MARKETS--0.58%
J.P. Morgan Chase & Co. 150 5,640
====================================================================================
DIVERSIFIED CHEMICALS--0.66%
Engelhard Corp. 220 6,389
====================================================================================
|
FS-326
MARKET
SHARES VALUE
------------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES--2.93%
Cendant Corp. 470 $11,130
------------------------------------------------------------------------------------
Deluxe Corp. 220 9,088
------------------------------------------------------------------------------------
Equifax Inc. 200 4,902
------------------------------------------------------------------------------------
University of Phoenix Online (a) 40 3,482
====================================================================================
28,602
====================================================================================
ELECTRIC UTILITIES--0.65%
Entergy Corp. 50 2,730
------------------------------------------------------------------------------------
Exelon Corp. 30 2,008
------------------------------------------------------------------------------------
Southern Co. (The) 55 1,582
====================================================================================
6,320
====================================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS--0.78%
Amphenol Corp.-Class A (a) 160 5,058
------------------------------------------------------------------------------------
Waters Corp. (a) 60 2,589
====================================================================================
7,647
====================================================================================
FOOD RETAIL--0.28%
SUPERVALU INC 90 2,771
====================================================================================
FOOTWEAR--1.27%
NIKE, Inc.-Class B 110 7,914
------------------------------------------------------------------------------------
Reebok International Ltd. 70 2,547
------------------------------------------------------------------------------------
Timberland Co. (The)-Class A (a) 30 1,882
====================================================================================
12,343
====================================================================================
HEALTH CARE DISTRIBUTORS--0.53%
Cardinal Health, Inc. 70 5,127
====================================================================================
HEALTH CARE EQUIPMENT--4.07%
Apogent Technologies Inc. (a) 210 6,808
------------------------------------------------------------------------------------
Bard (C.R.), Inc. 50 5,313
------------------------------------------------------------------------------------
Becton, Dickinson & Co. 100 5,055
------------------------------------------------------------------------------------
Guidant Corp. 30 1,890
------------------------------------------------------------------------------------
St. Jude Medical, Inc. (a) 70 5,338
------------------------------------------------------------------------------------
Stryker Corp. 130 12,861
------------------------------------------------------------------------------------
Zimmer Holdings, Inc. (a) 30 2,395
====================================================================================
39,660
====================================================================================
HEALTH CARE SERVICES--0.80%
IMS Health Inc. 310 7,827
====================================================================================
HEALTH CARE SUPPLIES--1.00%
Bausch & Lomb Inc. 90 5,655
------------------------------------------------------------------------------------
Fisher Scientific International Inc. (a) 70 4,098
====================================================================================
9,753
====================================================================================
HOME ENTERTAINMENT SOFTWARE--0.21%
Electronic Arts Inc. (a) 40 $ 2,025
====================================================================================
|
FS-327
MARKET
SHARES VALUE
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
HOME IMPROVEMENT RETAIL--2.07%
Home Depot, Inc. (The) 410 14,428
------------------------------------------------------------------------------------
Lowe's Cos., Inc. 110 5,727
====================================================================================
20,155
====================================================================================
HOMEBUILDING--0.53%
M.D.C. Holdings, Inc. 33 2,039
------------------------------------------------------------------------------------
Toll Brothers, Inc.(a) 80 3,166
====================================================================================
5,205
====================================================================================
HOUSEHOLD PRODUCTS--3.57%
Clorox Co. (The) 120 6,214
------------------------------------------------------------------------------------
Colgate-Palmolive Co. 50 2,894
------------------------------------------------------------------------------------
Kimberly-Clark Corp. 280 18,326
------------------------------------------------------------------------------------
Procter & Gamble Co. (The) 70 7,402
====================================================================================
34,836
====================================================================================
HOUSEWARES & SPECIALTIES--0.99%
Blyth, Inc. 180 5,852
------------------------------------------------------------------------------------
Fortune Brands, Inc. 50 3,812
====================================================================================
9,664
====================================================================================
HYPERMARKETS & SUPER CENTERS--1.58%
Wal-Mart Stores, Inc. 270 15,390
====================================================================================
INDUSTRIAL CONGLOMERATES--3.76%
3M Co. 150 12,972
------------------------------------------------------------------------------------
General Electric Co. 670 20,066
------------------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 130 3,568
====================================================================================
36,606
====================================================================================
INDUSTRIAL MACHINERY--0.65%
Graco Inc. 225 6,345
====================================================================================
INTEGRATED OIL & GAS--2.52%
ChevronTexaco Corp. 50 4,575
------------------------------------------------------------------------------------
Exxon Mobil Corp. 470 19,998
====================================================================================
24,573
====================================================================================
INTEGRATED TELECOMMUNICATION SERVICES--1.62%
SBC Communications Inc. 330 8,217
------------------------------------------------------------------------------------
Verizon Communications Inc. 200 7,548
====================================================================================
15,765
====================================================================================
INVESTMENT BANKING & BROKERAGE--1.56%
Bear Stearns Cos. Inc. (The) 40 3,206
------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 50 2,712
------------------------------------------------------------------------------------
Morgan Stanley 180 9,250
====================================================================================
15,168
====================================================================================
|
FS-328
MARKET
SHARES VALUE
------------------------------------------------------------------------------------
IT CONSULTING & OTHER SERVICES--0.45%
Acxiom Corp. 190 $ 4,397
====================================================================================
LIFE & HEALTH INSURANCE--0.45%
Prudential Financial, Inc. 100 4,394
====================================================================================
MANAGED HEALTH CARE--3.61%
Anthem, Inc. (a) 140 12,401
------------------------------------------------------------------------------------
UnitedHealth Group Inc. 220 13,526
------------------------------------------------------------------------------------
WellChoice Inc. (a) 60 2,544
------------------------------------------------------------------------------------
WellPoint Health Networks Inc. (a) 60 6,701
====================================================================================
35,172
====================================================================================
MULTI-LINE INSURANCE--1.76%
American International Group, Inc. 240 17,196
====================================================================================
OIL & GAS EXPLORATION & PRODUCTION--0.89%
Anadarko Petroleum Corp. 50 2,679
------------------------------------------------------------------------------------
Burlington Resources Inc. 40 2,691
------------------------------------------------------------------------------------
XTO Energy, Inc. 125 3,338
====================================================================================
8,708
====================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES--3.01%
Citigroup Inc. 610 29,335
====================================================================================
PERSONAL PRODUCTS--0.86%
Avon Products, Inc. 100 8,400
====================================================================================
PHARMACEUTICALS--5.85%
Abbott Laboratories (a) 140 6,163
------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 70 1,757
------------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings Inc. (a) 90 2,148
------------------------------------------------------------------------------------
Johnson & Johnson 280 15,128
------------------------------------------------------------------------------------
King Pharmaceuticals, Inc. (a) 120 2,070
------------------------------------------------------------------------------------
Merck & Co. Inc. 160 7,520
------------------------------------------------------------------------------------
Mylan Laboratories Inc. 80 1,833
------------------------------------------------------------------------------------
Pfizer Inc. 570 20,383
====================================================================================
57,002
====================================================================================
PROPERTY & CASUALTY INSURANCE--0.87%
Bristol West Holdings Inc. (a) 200 4,100
------------------------------------------------------------------------------------
Progressive Corp. (The) 50 4,376
====================================================================================
8,476
====================================================================================
PUBLISHING--0.57%
McGraw-Hill Cos., Inc. (The) 70 5,520
====================================================================================
|
FS-329
MARKET
SHARES VALUE
------------------------------------------------------------------------------------
REGIONAL BANKS--1.53%
National City Corp. 280 $ 9,708
------------------------------------------------------------------------------------
PNC Financial Services Group 60 3,186
------------------------------------------------------------------------------------
SunTrust Banks, Inc. 30 2,042
====================================================================================
14,936
====================================================================================
RESTAURANTS--1.69%
CBRL Group, Inc. 50 1,878
------------------------------------------------------------------------------------
McDonald's Corp. 250 6,808
------------------------------------------------------------------------------------
Yum! Brands, Inc. (a) 200 7,758
====================================================================================
16,444
====================================================================================
SEMICONDUCTORS--2.40%
Intel Corp. 910 23,414
====================================================================================
====================================================================================
SOFT DRINKS--3.25%
Coca-Cola Co. (The) 260 13,148
------------------------------------------------------------------------------------
PepsiCo, Inc. 340 18,527
====================================================================================
31,675
====================================================================================
====================================================================================
SPECIALTY CHEMICALS--0.65%
International Flavors & Fragrances Inc. 50 1,813
------------------------------------------------------------------------------------
Sigma-Aldrich Corp. 80 4,531
====================================================================================
6,344
====================================================================================
SPECIALTY STORES--0.57%
------------------------------------------------------------------------------------
Claire's Stores, Inc. 100 2,038
------------------------------------------------------------------------------------
Rent-A-Center, Inc. (a) 60 1,756
------------------------------------------------------------------------------------
Staples, Inc. 70 1,803
====================================================================================
5,597
====================================================================================
SYSTEMS SOFTWARE--6.15%
Adobe Systems Inc. 100 4,134
------------------------------------------------------------------------------------
BMC Software, Inc. (a) 150 2,595
------------------------------------------------------------------------------------
Microsoft Corp. 1,180 30,645
------------------------------------------------------------------------------------
Oracle Corp. (a) 1,410 15,820
------------------------------------------------------------------------------------
Symantec Corp. (a) 150 6,758
====================================================================================
59,952
====================================================================================
THRIFTS & MORTGAGE FINANCE--2.79%
Countrywide Financial Corp. 99 5,871
------------------------------------------------------------------------------------
Fannie Mae 95 6,528
------------------------------------------------------------------------------------
IndyMac Bancorp, Inc. 80 2,573
------------------------------------------------------------------------------------
Washington Mutual, Inc. 310 12,211
====================================================================================
27,183
====================================================================================
TOBACCO--1.14%
Altria Group, Inc. 200 11,076
====================================================================================
|
FS-330
MARKET
SHARES VALUE
------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.52%
AT&T Wireless Services Inc. (a) 370 $ 5,110
====================================================================================
Total Common Stocks (Cost $874,196) 943,869
____________________________________________________________________________________
====================================================================================
TOTAL INVESTMENTS--96.84% (Cost $874,196) 943,869
____________________________________________________________________________________
====================================================================================
OTHER ASSETS LESS LIABILITIES--3.16% 30,783
____________________________________________________________________________________
====================================================================================
NET ASSETS--100.00% $974,652
____________________________________________________________________________________
====================================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
See accompanying notes which are an integral part of the financial statements.
FS-331
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$874,196) $ 943,869
------------------------------------------------------------------------------------
Cash 29,753
------------------------------------------------------------------------------------
Receivables for:
Dividends 1,048
------------------------------------------------------------------------------------
Amount due from advisor 18,671
------------------------------------------------------------------------------------
Investment for deferred compensation and
retirement plans 6,232
------------------------------------------------------------------------------------
Other assets 154
====================================================================================
Total assets 999,727
____________________________________________________________________________________
====================================================================================
LIABILITIES:
Payable for deferred compensation and retirement plans 6,232
------------------------------------------------------------------------------------
Accrued trustees' fees 906
------------------------------------------------------------------------------------
Accrued transfer agent fees 23
------------------------------------------------------------------------------------
Accrued operating expenses 17,914
====================================================================================
Total liabilities 25,075
====================================================================================
Net assets applicable to shares outstanding $ 974,652
____________________________________________________________________________________
====================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 1,000,188
------------------------------------------------------------------------------------
Undistributed net investment income (loss) (7,127)
------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (88,082)
------------------------------------------------------------------------------------
Unrealized appreciation of investment
securities 69,673
====================================================================================
$ 974,652
____________________________________________________________________________________
====================================================================================
NET ASSETS:
Class A $ 389,860
____________________________________________________________________________________
====================================================================================
Class B $ 292,396
____________________________________________________________________________________
====================================================================================
Class C $ 292,396
____________________________________________________________________________________
====================================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 40,781
____________________________________________________________________________________
====================================================================================
Class B 30,585
____________________________________________________________________________________
====================================================================================
Class C 30,585
____________________________________________________________________________________
====================================================================================
Class A :
Net asset value per share $ 9.56
------------------------------------------------------------------------------------
Offering price per share:
(Net asset value of $9.56 divided by 94.50%) $ 10.12
____________________________________________________________________________________
====================================================================================
Class B :
Net asset value and offering price per share $ 9.56
____________________________________________________________________________________
====================================================================================
Class C :
Net asset value and offering price per share $ 9.56
____________________________________________________________________________________
====================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-332
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends $ 7,163
====================================================================================
EXPENSES:
Advisory fees 3,617
------------------------------------------------------------------------------------
Administrative services fees 24,864
------------------------------------------------------------------------------------
Custodian fees 2,177
------------------------------------------------------------------------------------
Distribution fees:
Class A 675
------------------------------------------------------------------------------------
Class B 1,447
------------------------------------------------------------------------------------
Class C 1,447
------------------------------------------------------------------------------------
Transfer agent fees 80
------------------------------------------------------------------------------------
Trustees' fees 6,026
------------------------------------------------------------------------------------
Reports to shareholders 4,851
------------------------------------------------------------------------------------
Professional fees 13,585
------------------------------------------------------------------------------------
Other 107
====================================================================================
Total expenses 58,876
====================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangements (50,431)
====================================================================================
Net expenses 8,445
====================================================================================
Net investment income (loss) (1,282)
====================================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment securities 23,443
------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities 26,128
====================================================================================
Net gain from investment securities 49,571
====================================================================================
Net increase in net assets resulting from operations $ 48,289
____________________________________________________________________________________
====================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-333
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
-------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,282) $ (2,307)
-------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and option contracts 23,443 (11,051)
-------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities and option
contracts 26,128 140,495
===================================================================================================================
Net increase in net assets resulting from operations 48,289 127,137
===================================================================================================================
Distributions to shareholders from net investment income:
Class A (529) (5,600)
-------------------------------------------------------------------------------------------------------------------
Class B (397) (4,200)
-------------------------------------------------------------------------------------------------------------------
Class C (397) (4,200)
===================================================================================================================
Decrease in net assets resulting from distributions (1,323) (14,000)
===================================================================================================================
Share transactions-net:
Class A 529 5,600
-------------------------------------------------------------------------------------------------------------------
Class B 397 4,200
-------------------------------------------------------------------------------------------------------------------
Class C 397 4,200
===================================================================================================================
Net increase in net assets resulting from share transactions 1,323 14,000
===================================================================================================================
Net increase in net assets 48,289 127,137
===================================================================================================================
NET ASSETS:
Beginning of period 926,363 799,226
===================================================================================================================
End of period (including undistributed net investment income (loss) of
$(7,127)and $(4,522) for 2004 and 2003, respectively) $974,652 $926,3633
___________________________________________________________________________________________________________________
===================================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-334
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Core Strategies 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 consists of multiple classes of shares. 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 is currently not open to new investors.
The Fund's investment objective is to provide long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last price as of the close of the customary trading session on the exchange where the security is principally traded.
FS-335
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 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.
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.
Brokerage commissions and mark ups are considered transaction costs
and are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
E. 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.
FS-336
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO 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 $1
billion of the Fund's average daily net assets, plus 0.70% of the next $1
billion of the Fund's average daily net assets, plus 0.625% of the Fund's
average daily net assets in excess of $2 billion. The Fund's advisor has
voluntarily agreed to waive advisory fees or reimburse expenses of Class A,
Class B and Class C shares to the extent necessary to limit Total Annual Fund
Operating Expenses (excluding certain items discussed below) to 1.75%. In
determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 1.75% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. Voluntary fee waivers or
reimbursements may be modified or discontinued at any time without further
notice to investors. During periods of fee waivers or reimbursements to the
extent the annualized expense ratio does not exceed the limit for the period
committed, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year. 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 on
investments by the Fund in such affiliated money market funds. For the six
months ended April 30, 2004, AIM waived fees of $3,617 and reimbursed expenses
of $43,111.
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 six months ended April 30, 2004, AIM was paid $24,864 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. During the six months ended April 30, 2004, AISI retained $37 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to 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 amount of sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. AIM Distributors has voluntarily agreed to waive all fees during the time the shares are not available for sale. Waivers may be modified or discontinued at any time. For the six months ended April 30, 2004, AIM Distributors waived all plan fees of $675, $1,447 and $1,447 for Class A, Class B and Class C shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
FS-337
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $6 and reductions in custodian fees of $128 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $134.
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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $1,297 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
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
FS-338
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL
EXPIRATION LOSS CARRYFORWARD*
-------------------------------------------------------------
October 31, 2010 $100,474
October 31, 2011 11,051
-------------------------------------------------------------
Total capital loss carryforward $111,525
=============================================================
|
*Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 7--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 six months ended April 30, 2004 was $286,965 and $298,625, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $105,892 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (36,219) =============================================================================== Net unrealized appreciation of investment securities $ 69,673 _______________________________________________________________________________ =============================================================================== Investments have the same costs for tax and financial statement purposes |
NOTE 8--SHARE INFORMATION
The Fund currently consists of three different classes of shares that are not currently available for sale: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
-----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------- -----------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A* 58 $ 529 722 $ 5,600
-----------------------------------------------------------------------------------
Class B* 43 397 541 4,200
-----------------------------------------------------------------------------------
Class C* 43 397 541 4,200
===================================================================================
144 $1,323 1,804 $14,000
___________________________________________________________________________________
===================================================================================
|
* Currently, the Fund is not open to investors. All shares are owned by AIM.
FS-339
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A
---------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
---------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.10 $ 7.99 $ 10.00
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.02) (0.03)
-----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 0.48 1.27 (1.98)
=======================================================================================================================
Total from investment operations 0.47 1.25 (2.01)
=======================================================================================================================
Less dividends from net investment income (0.01) (0.14) --
=======================================================================================================================
Net asset value, end of period $ 9.56 $ 9.10 $ 7.99
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return (a) 5.20% 15.95% (20.10)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 390 $ 371 $ 320
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.78% 1.82%(c)
-----------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 11.82%(b) 11.94% 13.71%(c)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.26)%(b) (0.28)% (0.45)%(c)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate (d) 31% 81% 42%
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based on those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$387,969.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-340
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.10 $ 7.99 $ 10.00
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.02) (0.03)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 0.48 1.27 (1.98)
======================================================================================================================
Total from investment operations 0.47 1.25 (2.01)
======================================================================================================================
Less dividends from net investment income (0.01) (0.14) --
==============================================================================================================
Net asset value, end of period $ 9.56 $ 9.10 $ 7.99
______________________________________________________________________________________________________________________
======================================================================================================================
Total return (a) 5.20% 15.95% (20.10)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 292 $ 278 $ 240
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.78% 1.82%(c)
----------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 12.47%(b) 12.59% 14.36%(c)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.26)%(b) (0.28)% (0.45)%(c)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate (d) 31% 81% 42%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based on those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$290,979.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-341
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.10 $ 7.99 $ 10.00
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.02) (0.03)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 0.48 1.27 (1.98)
======================================================================================================================
Total from investment operations 0.47 1.25 (2.01)
======================================================================================================================
Less dividends from net investment income (0.01) (0.14) --
==============================================================================================================
Net asset value, end of period $ 9.56 $ 9.10 $ 7.99
______________________________________________________________________________________________________________________
======================================================================================================================
Total return (a) 5.20% 15.95% (20.10)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 292 $ 278 $ 240
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.78% 1.82%(c)
----------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 12.47%(b) 12.59% 14.36%(c)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.26)%(b) (0.28)% (0.45)%(c)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate (d) 31% 81% 42%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based on those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$290,979.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-342
NOTE 10--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
FS-343
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,262 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of
FS-344
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
various provisions of the Employee Retirement Income Security Act ("ERISA");
(iii) breach of fiduciary duty; and/or (iv) breach of contract. These 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; various corrective measures under ERISA; rescission of certain Funds'
advisory agreements; declaration that the advisory agreement is unenforceable or
void; refund of advisory fees; interest; and attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-345
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCK & OTHER EQUITY INTERESTS-96.72%
APPAREL RETAIL-1.94%
Foot Locker, Inc. 170,000 $ 4,080,000
------------------------------------------------------------------------
Gap, Inc. (The) 275,000 6,052,750
========================================================================
10,132,750
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.81%
Coach, Inc.(a) 100,000 4,260,000
========================================================================
APPLICATION SOFTWARE-1.71%
Amdocs Ltd. (United Kingdom)(a) 70,000 1,858,500
------------------------------------------------------------------------
Citrix Systems, Inc.(a) 165,000 3,143,250
------------------------------------------------------------------------
Siebel Systems, Inc.(a) 383,200 3,939,296
========================================================================
8,941,046
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.88%
Franklin Resources, Inc. 100,000 5,483,000
------------------------------------------------------------------------
Investors Financial Services Corp. 135,000 5,247,450
------------------------------------------------------------------------
Legg Mason, Inc. 47,000 4,326,820
========================================================================
15,057,270
========================================================================
BIOTECHNOLOGY-5.19%
Biogen Idec Inc.(a) 70,000 4,130,000
------------------------------------------------------------------------
Genentech, Inc.(a) 103,000 12,648,400
------------------------------------------------------------------------
Invitrogen Corp.(a) 95,000 6,861,850
------------------------------------------------------------------------
QLT Inc. (Canada)(a) 132,000 3,560,040
========================================================================
27,200,290
========================================================================
CASINOS & GAMING-1.72%
GTECH Holdings Corp. 70,000 4,264,400
------------------------------------------------------------------------
International Game Technology 125,000 4,717,500
========================================================================
8,981,900
========================================================================
COMMUNICATIONS EQUIPMENT-8.86%
Avaya Inc.(a) 280,000 3,830,400
------------------------------------------------------------------------
Cisco Systems, Inc.(a) 665,000 13,878,550
------------------------------------------------------------------------
Comverse Technology, Inc.(a) 410,000 6,707,600
------------------------------------------------------------------------
Corning Inc.(a) 160,000 1,764,800
------------------------------------------------------------------------
Juniper Networks, Inc.(a) 207,900 4,548,852
------------------------------------------------------------------------
Motorola, Inc. 300,000 5,475,000
------------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 211,300 2,960,313
------------------------------------------------------------------------
Nortel Networks Corp. (Canada)(a) 720,000 2,692,800
------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 52,000 4,511,520
========================================================================
46,369,835
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
COMPUTER & ELECTRONICS RETAIL-0.36%
Best Buy Co., Inc. 35,000 $ 1,898,750
========================================================================
COMPUTER HARDWARE-2.32%
Dell Inc.(a) 350,000 12,148,500
========================================================================
COMPUTER STORAGE & PERIPHERALS-1.26%
Electronics for Imaging, Inc.(a) 150,000 3,807,000
------------------------------------------------------------------------
EMC Corp.(a) 250,000 2,790,000
========================================================================
6,597,000
========================================================================
CONSUMER ELECTRONICS-0.77%
Sony Corp.-ADR (Japan) 105,000 4,032,000
========================================================================
CONSUMER FINANCE-1.94%
American Express Co. 115,000 5,629,250
------------------------------------------------------------------------
MBNA Corp. 185,000 4,510,300
========================================================================
10,139,550
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.47%
Alliance Data Systems Corp.(a) 70,800 2,461,716
========================================================================
DEPARTMENT STORES-2.03%
J.C. Penney Co., Inc. 45,700 1,547,402
------------------------------------------------------------------------
Kohl's Corp.(a) 64,200 2,682,918
------------------------------------------------------------------------
Nordstrom, Inc. 90,000 3,206,700
------------------------------------------------------------------------
Saks Inc. 220,000 3,168,000
========================================================================
10,605,020
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.58%
University of Phoenix Online(a) 35,000 3,047,100
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.21%
Agilent Technologies, Inc.(a) 235,000 6,347,350
========================================================================
GENERAL MERCHANDISE STORES-0.83%
Target Corp. 100,000 4,337,000
========================================================================
HEALTH CARE DISTRIBUTORS-0.54%
Omnicare, Inc. 68,000 2,820,640
========================================================================
HEALTH CARE EQUIPMENT-6.06%
Bard (C.R.), Inc. 20,900 2,221,043
------------------------------------------------------------------------
Boston Scientific Corp.(a) 148,000 6,096,120
------------------------------------------------------------------------
Guidant Corp. 153,000 9,640,530
------------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 49,200 2,381,280
------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 66,000 5,665,440
------------------------------------------------------------------------
|
FS-346
MARKET
SHARES VALUE
------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-(CONTINUED)
Zimmer Holdings, Inc.(a) 72,000 $ 5,749,200
========================================================================
31,753,613
========================================================================
HEALTH CARE SERVICES-2.50%
Caremark Rx, Inc.(a) 200,000 6,770,000
------------------------------------------------------------------------
DaVita, Inc.(a) 124,000 6,336,400
========================================================================
13,106,400
========================================================================
HEALTH CARE SUPPLIES-2.17%
Alcon, Inc. (Switzerland) 75,000 5,568,750
------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 98,500 5,767,175
========================================================================
11,335,925
========================================================================
HOME ENTERTAINMENT SOFTWARE-0.77%
Electronic Arts Inc.(a) 80,000 4,049,600
========================================================================
HOME IMPROVEMENT RETAIL-1.04%
Home Depot, Inc. (The) 155,000 5,454,450
========================================================================
HOTELS, RESORTS & CRUISE LINES-1.64%
Carnival Corp. (Panama) 85,000 3,626,950
------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 125,000 4,973,750
========================================================================
8,600,700
========================================================================
HOUSEHOLD PRODUCTS-0.95%
Procter & Gamble Co. (The) 47,000 4,970,250
========================================================================
HYPERMARKETS & SUPER CENTERS-0.36%
Costco Wholesale Corp.(a) 50,000 1,872,500
========================================================================
INTERNET RETAIL-1.72%
Amazon.com, Inc.(a) 60,000 2,607,600
------------------------------------------------------------------------
eBay Inc.(a) 80,000 6,385,600
========================================================================
8,993,200
========================================================================
INTERNET SOFTWARE & SERVICES-1.64%
Yahoo! Inc.(a)(b) 170,000 8,578,200
========================================================================
INVESTMENT BANKING & BROKERAGE-2.62%
Goldman Sachs Group, Inc. (The) 100,000 9,675,000
------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 75,000 4,067,250
========================================================================
13,742,250
========================================================================
LIFE & HEALTH INSURANCE-0.98%
AFLAC Inc. 122,000 5,152,060
========================================================================
MANAGED HEALTH CARE-0.81%
UnitedHealth Group Inc. 69,000 4,242,120
========================================================================
MOTORCYCLE MANUFACTURERS-0.29%
Harley-Davidson, Inc. 26,500 1,492,480
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
MOVIES & ENTERTAINMENT-1.33%
Viacom Inc.-Class B 85,000 $ 3,285,250
------------------------------------------------------------------------
Walt Disney Co. (The) 160,000 3,684,800
========================================================================
6,970,050
========================================================================
MULTI-LINE INSURANCE-1.30%
American International Group, Inc. 95,000 6,806,750
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.84%
Citigroup Inc. 200,000 9,618,000
========================================================================
PACKAGED FOODS & MEATS-0.54%
Hershey Foods Corp. 31,800 2,826,702
========================================================================
PERSONAL PRODUCTS-2.57%
Avon Products, Inc. 60,000 5,040,000
------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 76,300 3,487,673
------------------------------------------------------------------------
Gillette Co. (The) 120,000 4,910,400
========================================================================
13,438,073
========================================================================
PHARMACEUTICALS-8.13%
Eon Labs, Inc.(a) 105,000 6,903,750
------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 50,000 3,224,000
------------------------------------------------------------------------
Lilly (Eli) & Co. 87,000 6,421,470
------------------------------------------------------------------------
MGI Pharma, Inc.(a) 42,000 2,596,440
------------------------------------------------------------------------
Pfizer Inc. 348,000 12,444,480
------------------------------------------------------------------------
Sepracor Inc.(a)(b) 90,000 4,302,900
------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 48,000 2,076,000
------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 75,000 4,617,000
========================================================================
42,586,040
========================================================================
PROPERTY & CASUALTY INSURANCE-1.59%
Allstate Corp. (The) 120,000 5,508,000
------------------------------------------------------------------------
Progressive Corp. (The) 32,000 2,800,640
========================================================================
8,308,640
========================================================================
PUBLISHING-1.09%
Getty Images, Inc.(a)(b) 105,000 5,733,000
========================================================================
REGIONAL BANKS-0.73%
Bank of Hawaii Corp. 87,500 3,825,500
========================================================================
RESTAURANTS-1.60%
Wendy's International, Inc. 100,000 3,900,000
------------------------------------------------------------------------
Yum! Brands, Inc.(a) 115,000 4,460,850
========================================================================
8,360,850
========================================================================
SEMICONDUCTORS-7.26%
Analog Devices, Inc. 360,000 15,336,000
------------------------------------------------------------------------
Fairchild Semiconductor International,
Inc.(a) 151,200 2,943,864
------------------------------------------------------------------------
Microchip Technology Inc. 401,700 11,255,634
------------------------------------------------------------------------
Texas Instruments Inc. 150,000 3,765,000
------------------------------------------------------------------------
|
FS-347
MARKET
SHARES VALUE
------------------------------------------------------------------------
SEMICONDUCTORS-(CONTINUED)
Xilinx, Inc.(a) 140,000 $ 4,708,200
========================================================================
38,008,698
========================================================================
SOFT DRINKS-1.04%
PepsiCo, Inc. 100,000 5,449,000
========================================================================
SPECIALIZED FINANCE-0.67%
Chicago Mercantile Exchange (The)(b) 30,000 3,519,000
========================================================================
SPECIALTY STORES-0.56%
Tiffany & Co. 75,000 2,925,000
========================================================================
SYSTEMS SOFTWARE-5.45%
BMC Software, Inc.(a) 170,000 2,941,000
------------------------------------------------------------------------
Microsoft Corp. 275,000 7,141,750
------------------------------------------------------------------------
Network Associates, Inc.(a) 225,000 3,528,000
------------------------------------------------------------------------
Oracle Corp.(a) 350,000 3,927,000
------------------------------------------------------------------------
Symantec Corp.(a) 138,400 6,234,920
------------------------------------------------------------------------
VERITAS Software Corp.(a) 179,500 4,787,265
========================================================================
28,559,935
========================================================================
TECHNOLOGY DISTRIBUTORS-1.19%
CDW Corp. 100,000 6,249,000
========================================================================
THRIFTS & MORTGAGE FINANCE-0.52%
New York Community Bancorp, Inc. 108,500 2,720,095
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
WIRELESS TELECOMMUNICATION SERVICES-0.34%
Nextel Communications, Inc.-Class A(a) 75,000 $ 1,789,500
========================================================================
Total Common Stock & Other Equity
Interests (Cost $417,909,166) 506,415,298
========================================================================
MONEY MARKET FUNDS-4.54%
Liquid Assets Portfolio-Institutional
Class(c) 11,889,038 11,889,038
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 11,889,038 11,889,038
========================================================================
Total Money Market Funds (Cost
$23,778,076) 23,778,076
========================================================================
TOTAL INVESTMENTS-101.26% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $441,687,242) 530,193,374
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-3.07%
Liquid Assets Portfolio-Institutional
Class(c)(d) 16,072,750 16,072,750
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $16,072,750) 16,072,750
========================================================================
TOTAL INVESTMENTS-104.33% (Cost $457,759,992) 546,266,124
========================================================================
OTHER ASSETS LESS LIABILITIES-(4.33%) (22,672,850)
========================================================================
NET ASSETS-100.00% $523,593,274
________________________________________________________________________
========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-348
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$417,909,166)* $ 506,415,298
------------------------------------------------------------
Investments in affiliated money market funds
(cost $39,850,826) 39,850,826
============================================================
Total investments (cost $457,759,992) 546,266,124
============================================================
Receivables for:
Investments sold 11,407,996
------------------------------------------------------------
Fund shares sold 200,995
------------------------------------------------------------
Dividends 692,225
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 40,985
------------------------------------------------------------
Other assets 30,198
============================================================
Total assets 558,638,523
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 16,777,816
------------------------------------------------------------
Fund shares reacquired 1,106,097
------------------------------------------------------------
Deferred compensation and retirement plans 57,487
------------------------------------------------------------
Collateral upon return of securities
loaned 16,072,750
------------------------------------------------------------
Accrued distribution fees 337,410
------------------------------------------------------------
Accrued trustees' fees 1,192
------------------------------------------------------------
Accrued transfer agent fees 592,617
------------------------------------------------------------
Accrued operating expenses 99,880
============================================================
Total liabilities 35,045,249
============================================================
Net assets applicable to shares outstanding $ 523,593,274
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,288,547,512
------------------------------------------------------------
Undistributed net investment income (loss) (4,173,137)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (849,287,233)
------------------------------------------------------------
Unrealized appreciation of investment
securities 88,506,132
============================================================
$ 523,593,274
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 198,927,994
____________________________________________________________
============================================================
Class B $ 236,732,423
____________________________________________________________
============================================================
Class C $ 87,932,857
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 25,231,639
____________________________________________________________
============================================================
Class B 31,006,526
____________________________________________________________
============================================================
Class C 11,519,057
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 7.88
------------------------------------------------------------
Offering price per share:
(Net asset value of $7.88 divided by
94.50%) $ 8.34
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 7.63
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 7.63
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $15,237,305 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-349
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $31,420) $ 2,125,862
--------------------------------------------------------------------------
Dividends from affiliated money market funds* 136,934
==========================================================================
Total investment income 2,262,796
==========================================================================
EXPENSES:
Advisory fees 2,380,569
--------------------------------------------------------------------------
Administrative services fees 74,361
--------------------------------------------------------------------------
Custodian fees 37,236
--------------------------------------------------------------------------
Distribution fees:
Class A 371,797
--------------------------------------------------------------------------
Class B 1,263,657
--------------------------------------------------------------------------
Class C 474,735
--------------------------------------------------------------------------
Transfer agent fees 1,613,079
--------------------------------------------------------------------------
Trustees' fees 9,651
--------------------------------------------------------------------------
Other 170,128
==========================================================================
Total expenses 6,395,213
==========================================================================
Less: Fees waived and expense offset arrangements (7,125)
==========================================================================
Net expenses 6,388,088
==========================================================================
Net investment income (loss) (4,125,292)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 41,133,870
--------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (29,747,044)
==========================================================================
Net gain from investment securities 11,386,826
==========================================================================
Net increase in net assets resulting from operations $ 7,261,534
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-350
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (4,125,292) $ (8,459,316)
------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 41,133,870 12,899,204
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts (29,747,044) 124,414,828
==========================================================================================
Net increase in net assets resulting from operations 7,261,534 128,854,716
==========================================================================================
Share transactions-net:
Class A (17,086,985) (26,713,489)
------------------------------------------------------------------------------------------
Class B (17,887,909) (29,364,137)
------------------------------------------------------------------------------------------
Class C (9,326,007) (14,000,141)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (44,300,901) (70,077,767)
==========================================================================================
Net increase (decrease) in net assets (37,039,367) 58,776,949
==========================================================================================
NET ASSETS:
Beginning of period 560,632,641 501,855,692
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(4,173,137) and $(47,845) for 2004 and
2003, respectively) $523,593,274 $560,632,641
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-351
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Dent Demographic Trends 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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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
FS-352
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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 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.
FS-353
I. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). H.S. Dent Advisors, Inc. ("H.S. Dent") is the Fund's sub-advisor. Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $2 billion of the Fund's average daily net assets, plus 0.80% of the Fund's average daily net assets exceeding $2 billion. Under the terms of the sub-advisory agreement between AIM and H.S. Dent, AIM pays H.S. Dent at the annual rate of 0.13% of the first $1 billion of the Fund's average daily net assets, plus 0.10% of the next $1 billion of the Fund's average daily net assets, plus 0.07% of the Fund's average daily net assets in excess of $2 billion. The Fund's advisor has voluntarily agreed to waive advisory fees or reimburse expenses of Class A, Class B and Class C shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Class A shares to 2.00%. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the 2.00% cap: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), as defined in the Financial Accounting Standard's Board's Generally Accepted Accounting Principles or as approved by the Fund's board of trustees; (v) expenses related to a merger or reorganization, as approved by the Fund's board of trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the only expense offset arrangements from which the Fund benefits are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. During periods of waivers or reimbursements, to the extent the annualized expense ratio does not exceed the limit for the period committed, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $2,527.
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 six months ended April 30, 2004, AIM was paid $74,361 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. During the six months ended April 30, 2004, AISI retained $692,021 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B and Class C shares paid $371,797, $1,263,657 and $474,735, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $51,231 in front-end sales commissions from the sale of Class A shares and $796, $1,905 and $3,924 from Class A, Class B and Class C 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.
FS-354
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
MARKET PROCEEDS UNREALIZED MARKET
VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $14,188,517 $48,689,818 $ (50,989,297) $ -- $11,889,038 $ 62,834 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 14,188,517 48,689,818 (50,989,297) -- 11,889,038 61,511 --
=================================================================================================================================
Subtotal $28,377,034 $97,379,636 $(101,978,594) $ -- $23,778,076 $124,345 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
MARKET PROCEEDS UNREALIZED MARKET
VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND* REALIZED
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $13,760,300 $ 94,102,030 $ (91,789,580) $ -- $16,072,750 $ 12,589 $ --
=================================================================================================================================
Total $42,137,334 $191,481,666 $(193,768,174) $ -- $39,850,826 $136,934 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $71,981.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $4,598 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $4,598.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $3,212 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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.
FS-355
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $15,237,305 were on loan to brokers. The loans were secured by cash collateral of $16,072,750 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $12,589 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------
October 31, 2007 $ 3,389,675
---------------------------------------------------------
October 31, 2008 144,576,334
---------------------------------------------------------
October 31, 2009 541,794,870
---------------------------------------------------------
October 31, 2010 195,681,695
---------------------------------------------------------
October 31, 2011 1,906,887
=========================================================
Total capital loss carryforward $887,349,461
_________________________________________________________
=========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
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 six months ended April 30, 2004 was $350,123,177 and $385,512,908, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
--------------------------------------------------------------
Aggregate unrealized appreciation of investment
securities $96,851,253
--------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (10,330,997)
==============================================================
Net unrealized appreciation of investment
securities $86,520,256
______________________________________________________________
==============================================================
Cost of investments for tax purposes is $459,745,868.
|
FS-356
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
-----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,675,825 $ 13,608,909 3,976,331 $ 26,689,358
-----------------------------------------------------------------------------------------------------------------------
Class B 1,307,944 10,261,237 3,032,772 19,799,210
-----------------------------------------------------------------------------------------------------------------------
Class C 595,681 4,707,624 1,236,736 8,126,066
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 192,597 1,570,140 268,267 1,801,536
-----------------------------------------------------------------------------------------------------------------------
Class B (198,578) (1,570,140) (275,388) (1,801,536)
=======================================================================================================================
Reacquired:
Class A (3,981,915) (32,266,034) (8,611,375) (55,204,383)
-----------------------------------------------------------------------------------------------------------------------
Class B (3,377,909) (26,579,006) (7,607,073) (47,361,811)
-----------------------------------------------------------------------------------------------------------------------
Class C (1,788,061) (14,033,631) (3,515,974) (22,126,207)
=======================================================================================================================
(5,574,416) $(44,300,901) (11,495,704) $(70,077,767)
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------------------------
JUNE 7, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.78 $ 6.00 $ 7.62 $ 15.40 $ 12.14 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.09) (0.12) (0.12) (0.11) (0.03)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.15 1.87 (1.50) (7.66) 3.37 2.17
=================================================================================================================================
Total from investment operations 0.10 1.78 (1.62) (7.78) 3.26 2.14
=================================================================================================================================
Net asset value, end of period $ 7.88 $ 7.78 $ 6.00 $ 7.62 $ 15.40 $ 12.14
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 1.29% 29.67% (21.26)% (50.52)% 26.85% 21.40%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $198,928 $212,863 $190,253 $312,377 $666,929 $163,872
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.88%(b) 2.01%(c) 1.87% 1.64% 1.50% 1.60%(c)(d)
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.07)%(b) (1.29)% (1.31)% (1.04)% (0.93)% (1.00)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 66% 152% 189% 143% 90% 29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$213,622,863.
(c) After fee waivers and reimbursements. Ratio of expenses to average net
assets prior to fee waivers and reimbursements for 2003 and 1999 was
2.02% and 1.65% (annualized), respectively.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-357
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------------------------------------------
JUNE 7, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.13) (0.17) (0.18) (0.18) (0.04)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.14 1.82 (1.46) (7.58) 3.33 2.15
=================================================================================================================================
Total from investment operations 0.07 1.69 (1.63) (7.76) 3.15 2.11
=================================================================================================================================
Net asset value, end of period $ 7.63 $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 0.93% 28.79% (21.73)% (50.85)% 26.01% 21.10%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $236,732 $251,650 $223,666 $367,494 $748,480 $177,430
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.53%(b) 2.66%(c) 2.53% 2.32% 2.17% 2.24%(c)(d)
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.72)%(b) (1.94)% (1.97)% (1.72)% (1.60)% (1.64)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 66% 152% 189% 143% 90% 29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$254,120,073.
(c) After fee waivers and reimbursements. Ratio of expenses to average net
assets prior to fee waivers and reimbursements for 2003 and 1999 was
2.67% and 2.29% (annualized), respectively.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS C
----------------------------------------------------------------------------------
JUNE 7, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.13) (0.17) (0.19) (0.17) (0.04)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.14 1.82 (1.46) (7.57) 3.32 2.15
=================================================================================================================================
Total from investment operations 0.07 1.69 (1.63) (7.76) 3.15 2.11
=================================================================================================================================
Net asset value, end of period $ 7.63 $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 0.93% 28.79% (21.73)% (50.85)% 26.01% 21.10%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $87,933 $96,120 $87,938 $149,925 $309,821 $51,605
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.53%(b) 2.66%(c) 2.53% 2.32% 2.17% 2.24%(c)(d)
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.72)%(b) (1.94)% (1.97)% (1.72)% (1.60)% (1.64)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 66% 152% 189% 143% 90% 29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns to
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$95,468,657.
(c) After fee waivers and reimbursements. Ratio of expenses to average net
assets prior to fee waivers and reimbursements for 2003 and 1999 was
2.67% and 2.29% (annualized), respectively.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-358
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $31,076 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by
FS-359
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-360
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-93.90%
ADVERTISING-1.41%
Omnicom Group Inc. 13,600 $ 1,081,336
=======================================================================
AEROSPACE & DEFENSE-1.64%
Raytheon Co. 18,400 593,584
-----------------------------------------------------------------------
United Technologies Corp. 7,700 664,202
=======================================================================
1,257,786
=======================================================================
APPAREL RETAIL-0.97%
Limited Brands 36,300 749,232
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.48%
V. F. Corp. 24,700 1,140,152
=======================================================================
APPLICATION SOFTWARE-0.75%
SAP A.G.-ADR (Germany) 15,500 577,840
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.53%
Federated Investors, Inc.-Class B 13,900 408,660
=======================================================================
AUTO PARTS & EQUIPMENT-0.51%
Johnson Controls, Inc. 7,100 389,506
=======================================================================
BREWERS-0.61%
Anheuser-Busch Cos., Inc. 9,100 466,284
=======================================================================
BUILDING PRODUCTS-2.45%
Masco Corp. 67,300 1,885,073
=======================================================================
COMMUNICATIONS EQUIPMENT-0.52%
Motorola, Inc. 22,100 403,325
=======================================================================
COMPUTER HARDWARE-1.21%
Hewlett-Packard Co. 31,800 626,460
-----------------------------------------------------------------------
International Business Machines Corp. 3,400 299,778
=======================================================================
926,238
=======================================================================
CONSTRUCTION MATERIALS-0.70%
Lafarge North America Inc. 12,100 535,425
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.68%
Automatic Data Processing, Inc. 29,700 1,301,157
-----------------------------------------------------------------------
First Data Corp. 33,600 1,525,104
=======================================================================
2,826,261
=======================================================================
DISTRIBUTORS-0.93%
Genuine Parts Co. 19,900 712,420
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
DIVERSIFIED BANKS-4.26%
Bank of America Corp. 19,600 $ 1,577,604
-----------------------------------------------------------------------
Comerica Inc. 7,800 402,714
-----------------------------------------------------------------------
U.S. Bancorp 21,900 561,516
-----------------------------------------------------------------------
Wachovia Corp. 16,000 732,000
=======================================================================
3,273,834
=======================================================================
DIVERSIFIED CHEMICALS-2.42%
Dow Chemical Co. (The) 18,600 738,234
-----------------------------------------------------------------------
PPG Industries, Inc. 18,900 1,120,959
=======================================================================
1,859,193
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.18%
H&R Block, Inc. 9,900 446,589
-----------------------------------------------------------------------
Viad Corp. 18,500 461,760
=======================================================================
908,349
=======================================================================
ELECTRIC UTILITIES-3.88%
Entergy Corp. 12,400 677,040
-----------------------------------------------------------------------
Exelon Corp. 20,300 1,358,882
-----------------------------------------------------------------------
FirstEnergy Corp. 13,000 508,300
-----------------------------------------------------------------------
Wisconsin Energy Corp. 14,000 439,600
=======================================================================
2,983,822
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.20%
Cooper Industries, Ltd.-Class A (Bermuda) 8,700 477,717
-----------------------------------------------------------------------
Emerson Electric Co. 20,200 1,216,444
=======================================================================
1,694,161
=======================================================================
FOOTWEAR-0.54%
NIKE, Inc.-Class B 5,800 417,310
=======================================================================
HEALTH CARE EQUIPMENT-3.66%
Bard (C.R.), Inc. 7,500 797,025
-----------------------------------------------------------------------
Baxter International Inc. 40,600 1,284,990
-----------------------------------------------------------------------
Becton, Dickinson & Co. 14,500 732,975
=======================================================================
2,814,990
=======================================================================
HOME IMPROVEMENT RETAIL-1.08%
Home Depot, Inc. (The) 23,500 826,965
=======================================================================
HOUSEHOLD APPLIANCES-0.68%
Snap-on Inc. 15,400 520,212
=======================================================================
HOUSEHOLD PRODUCTS-0.77%
Kimberly-Clark Corp. 9,100 595,595
=======================================================================
|
FS-361
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INDUSTRIAL MACHINERY-5.60%
Dover Corp. 9,600 $ 384,288
-----------------------------------------------------------------------
Eaton Corp. 6,500 385,970
-----------------------------------------------------------------------
Illinois Tool Works Inc. 19,800 1,706,958
-----------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 11,700 755,235
-----------------------------------------------------------------------
Pentair, Inc. 18,000 1,072,620
=======================================================================
4,305,071
=======================================================================
INSURANCE BROKERS-1.50%
Marsh & McLennan Cos., Inc. 25,600 1,154,560
=======================================================================
INTEGRATED OIL & GAS-7.33%
BP PLC-ADR (United Kingdom) 6,200 327,980
-----------------------------------------------------------------------
ChevronTexaco Corp. 11,100 1,015,650
-----------------------------------------------------------------------
ConocoPhillips 11,700 834,210
-----------------------------------------------------------------------
Eni S.p.A. (Italy)(a) 30,100 611,024
-----------------------------------------------------------------------
Exxon Mobil Corp. 32,000 1,361,600
-----------------------------------------------------------------------
Occidental Petroleum Corp. 20,100 948,720
-----------------------------------------------------------------------
Total S.A. (France)(a) 2,900 533,381
=======================================================================
5,632,565
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.31%
SBC Communications Inc. 40,300 1,003,470
=======================================================================
INVESTMENT BANKING & BROKERAGE-1.22%
Morgan Stanley 18,300 940,437
=======================================================================
LIFE & HEALTH INSURANCE-0.76%
Prudential Financial, Inc. 13,300 584,402
=======================================================================
MULTI-LINE INSURANCE-1.39%
American International Group, Inc. 7,000 501,550
-----------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 9,300 568,044
=======================================================================
1,069,594
=======================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.92%
Dominion Resources, Inc. 9,200 587,052
-----------------------------------------------------------------------
Public Service Enterprise Group Inc. 20,800 892,320
=======================================================================
1,479,372
=======================================================================
OFFICE SERVICES & SUPPLIES-0.71%
Pitney Bowes Inc. 12,400 542,500
=======================================================================
OIL & GAS DRILLING-0.69%
GlobalSantaFe Corp. (Cayman Islands) 20,000 527,400
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.86%
Citigroup Inc. 29,700 1,428,273
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PACKAGED FOODS & MEATS-5.01%
General Mills, Inc. 21,900 $ 1,067,625
-----------------------------------------------------------------------
Hershey Foods Corp. 7,200 640,008
-----------------------------------------------------------------------
Kellogg Co. 23,000 986,700
-----------------------------------------------------------------------
Sara Lee Corp. 50,200 1,158,616
=======================================================================
3,852,949
=======================================================================
PAPER PACKAGING-1.32%
Bemis Co., Inc. 15,200 410,552
-----------------------------------------------------------------------
Sonoco Products Co. 24,300 604,098
=======================================================================
1,014,650
=======================================================================
PERSONAL PRODUCTS-1.38%
Avon Products, Inc. 12,600 1,058,400
=======================================================================
PHARMACEUTICALS-10.53%
Abbott Laboratories 25,400 1,118,108
-----------------------------------------------------------------------
Bristol-Myers Squibb Co. 49,900 1,252,490
-----------------------------------------------------------------------
Johnson & Johnson 23,600 1,275,108
-----------------------------------------------------------------------
Lilly (Eli) & Co. 17,400 1,284,294
-----------------------------------------------------------------------
Merck & Co. Inc. 20,900 982,300
-----------------------------------------------------------------------
Pfizer Inc. 31,900 1,140,744
-----------------------------------------------------------------------
Wyeth 27,200 1,035,504
=======================================================================
8,088,548
=======================================================================
PROPERTY & CASUALTY INSURANCE-3.45%
ACE Ltd. (Cayman Islands) 13,300 583,072
-----------------------------------------------------------------------
Chubb Corp. (The) 6,800 469,200
-----------------------------------------------------------------------
MBIA Inc. 9,800 577,122
-----------------------------------------------------------------------
SAFECO Corp. 9,300 407,247
-----------------------------------------------------------------------
St. Paul Cos., Inc. (The) 15,200 618,184
=======================================================================
2,654,825
=======================================================================
PUBLISHING-0.87%
McGraw-Hill Cos., Inc. (The) 8,500 670,310
=======================================================================
REGIONAL BANKS-1.27%
Cullen/Frost Bankers, Inc. 10,800 467,640
-----------------------------------------------------------------------
KeyCorp 17,000 504,900
=======================================================================
972,540
=======================================================================
RESTAURANTS-0.55%
Outback Steakhouse, Inc. 9,700 426,121
=======================================================================
SOFT DRINKS-1.60%
Coca-Cola Co. (The) 6,500 328,705
-----------------------------------------------------------------------
PepsiCo, Inc. 16,500 899,085
=======================================================================
1,227,790
=======================================================================
SYSTEMS SOFTWARE-1.52%
Microsoft Corp. 44,900 1,166,053
=======================================================================
|
FS-362
MARKET
SHARES VALUE
-----------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-2.79%
Fannie Mae 19,900 $ 1,367,528
-----------------------------------------------------------------------
MGIC Investment Corp. 10,500 773,010
=======================================================================
2,140,538
=======================================================================
TOBACCO-1.26%
Altria Group, Inc. 17,500 969,150
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $63,742,043) 72,163,487
=======================================================================
PRINCIPAL
AMOUNT
BONDS & NOTES-0.67%
AEROSPACE & DEFENSE-0.11%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06 $ 75,000 84,089
=======================================================================
BROADCASTING & CABLE TV-0.14%
TCI Communications, Inc., Medium Term Notes,
8.35%, 02/15/05 100,000 104,833
=======================================================================
ELECTRIC UTILITIES-0.22%
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05 160,000 171,379
=======================================================================
|
-----------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
INTEGRATED TELECOMMUNICATION SERVICES-0.07%
Deutsche Telekom International Finance B.V.
(Netherlands), Unsec. Gtd. Unsub. Global
Bonds, 8.25%, 06/15/05 $ 50,000 $ 53,345
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.13%
General Electric Capital Corp.-Series A,
Medium Term Global Notes, 2.85%, 01/30/06 100,000 100,675
=======================================================================
Total Bonds & Notes (Cost $511,742) 514,321
=======================================================================
SHARES
MONEY MARKET FUNDS-6.25%
Liquid Assets Portfolio-Institutional
Class(b) 2,400,006 2,400,006
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(b) 2,400,006 2,400,006
=======================================================================
Total Money Market Funds (Cost
$4,800,012) 4,800,012
=======================================================================
TOTAL INVESTMENTS-100.82% (Cost $69,053,797) 77,477,820
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.82%) (629,069)
=======================================================================
NET ASSETS-100.00% $76,848,751
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Gtd. - Guaranteed Sr. - Senior Unsec. - Unsecured Unsub. - Unsubordinated |
Notes to Schedule of Investments:
(a) Security fair valued in accordance with the procedures established by the
Board of Trustees. The aggregate market value of these securities at
04/30/04 was $1,144,405, which represented 1.48% of the Fund's total
investments. See Note 1A.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying notes which are an integral part of the financial statements.
FS-363
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$64,253,785) $72,677,808
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $4,800,012) 4,800,012
===========================================================
Total investments (cost $69,053,797) 77,477,820
===========================================================
Receivables for:
Fund shares sold 464,002
-----------------------------------------------------------
Dividends and interest 103,434
-----------------------------------------------------------
Amount due from advisor 3,855
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 7,140
-----------------------------------------------------------
Other assets 24,516
===========================================================
Total assets 78,080,767
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,035,306
-----------------------------------------------------------
Fund shares reacquired 64,647
-----------------------------------------------------------
Deferred compensation and retirement plans 7,140
-----------------------------------------------------------
Accrued distribution fees 42,181
-----------------------------------------------------------
Accrued trustees' fees 943
-----------------------------------------------------------
Accrued transfer agent fees 30,445
-----------------------------------------------------------
Accrued operating expenses 51,354
===========================================================
Total liabilities 1,232,016
===========================================================
Net assets applicable to shares outstanding $76,848,751
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $67,171,127
-----------------------------------------------------------
Undistributed net investment income (32,108)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and option contracts 1,285,667
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 8,424,065
===========================================================
$76,848,751
___________________________________________________________
===========================================================
NET ASSETS:
Class A $35,357,886
___________________________________________________________
===========================================================
Class B $31,922,068
___________________________________________________________
===========================================================
Class C $ 9,568,797
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 3,138,592
___________________________________________________________
===========================================================
Class B 2,858,123
___________________________________________________________
===========================================================
Class C 857,707
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.27
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.27 divided
by 94.50%) $ 11.93
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 11.17
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 11.16
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-364
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $546) $ 683,189
------------------------------------------------------------------------
Dividends from affiliated money market funds 20,415
------------------------------------------------------------------------
Interest 10,031
========================================================================
Total investment income 713,635
========================================================================
EXPENSES:
Advisory fees 238,840
------------------------------------------------------------------------
Administrative services fees 24,864
------------------------------------------------------------------------
Custodian fees 14,354
------------------------------------------------------------------------
Distribution fees:
Class A 51,677
------------------------------------------------------------------------
Class B 132,127
------------------------------------------------------------------------
Class C 38,679
------------------------------------------------------------------------
Transfer agent fees 85,341
------------------------------------------------------------------------
Trustees' fees 6,282
------------------------------------------------------------------------
Other 65,708
========================================================================
Total expenses 657,872
========================================================================
Less: Fees waived and expense offset arrangements (228,301)
========================================================================
Net expenses 429,571
========================================================================
Net investment income 284,064
========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 1,943,408
------------------------------------------------------------------------
Foreign currencies 3,020
------------------------------------------------------------------------
Option contracts written 9,626
========================================================================
1,956,054
========================================================================
Change in net unrealized appreciation of:
Investment securities 3,517,851
------------------------------------------------------------------------
Foreign currencies 28
========================================================================
3,517,879
========================================================================
Net gain from investment securities, foreign currencies and
option contracts 5,473,933
========================================================================
Net increase in net assets resulting from operations $5,757,997
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-365
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 284,064 $ 85,307
----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 1,956,054 (463,512)
----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 3,517,879 6,127,078
========================================================================================
Net increase in net assets resulting from operations 5,757,997 5,748,873
========================================================================================
Distributions to shareholders from net investment income:
Class A (196,161) (67,755)
----------------------------------------------------------------------------------------
Class B (89,903) (14,134)
----------------------------------------------------------------------------------------
Class C (26,722) (3,436)
========================================================================================
Decrease in net assets resulting from distributions (312,786) (85,325)
========================================================================================
Share transactions-net:
Class A 10,460,715 11,899,583
----------------------------------------------------------------------------------------
Class B 8,075,850 12,028,596
----------------------------------------------------------------------------------------
Class C 3,062,150 4,163,744
========================================================================================
Net increase in net assets resulting from share
transactions 21,598,715 28,091,923
========================================================================================
Net increase in net assets 27,043,926 33,755,471
========================================================================================
NET ASSETS:
Beginning of period 49,804,825 16,049,354
========================================================================================
End of period (including undistributed net investment income
of $(32,108) and $(3,386) for 2004 and 2003, respectively) $76,848,751 $49,804,825
________________________________________________________________________________________
========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-366
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Diversified Dividend 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 authorized to issue 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 growth of capital with a secondary objective of current income. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis.
FS-367
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
C. DISTRIBUTIONS -- Distributions from income are declared and paid quarterly and are recorded on ex-dividend date. Distributions from 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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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 and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO 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 $1 billion of the Fund's average daily net assets, plus 0.70% of the next $1 billion of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $2 billion. The Fund's advisor has contractually agreed to waive advisory fees or reimburse expenses of Class A, Class B and Class C shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Class A shares to 1.50%. In addition, the Fund's advisor has voluntarily agreed to waive advisory fees or reimburse expenses of Class A, Class B and Class C shares to the extent
FS-368
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
necessary to limit Total Annual Fund Operating Expenses (excluding certain items
discussed below) to 1.00%, 1.65% and 1.65%, respectively. In determining the
advisor's obligation to waive advisory fees and/or reimburse expenses, the
following expenses are not taken into account, and could cause the Total Annual
Fund Operating Expenses to exceed the caps stated above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. The contractual expense limitation
agreement is in effect through October 31, 2004. During periods of fee waivers
and reimbursements to the extent the annualized expense ratio does not exceed
the contractual limit for the period committed, AIM will retain its ability to
be reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. 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 on investments by the Fund in such affiliated money market
funds. For the six months ended April 30, 2004, AIM waived fees of $227,865.
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 six months ended April 30, 2004, AIM was paid $24,864 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. During the six months ended April 30, 2004, AISI retained $37,433 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B and Class C shares paid $51,677, $132,127 and $38,679, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $33,045 in front-end sales commissions from the sale of Class A shares and $18, $162 and $735 from Class A, Class B and Class C 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--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order the Securities and Exchange Commission ("SEC") and approved procedures by the Board of Trustees, to invest daily available cash balances in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash. The table below shows the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $1,615,482 $ 8,345,210 $ (7,560,686) $ -- $2,400,006 $10,348 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 1,615,482 8,345,210 (7,560,686) -- 2,400,006 10,067 --
====================================================================================================================================
Total $3,230,964 $16,690,420 $(15,121,372) $ -- $4,800,012 $20,415 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
FS-369
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $436 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $436.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $2,345 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
---------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------------------------------------------------------
Beginning of period -- $ --
---------------------------------------------------------
Written 133 11,703
---------------------------------------------------------
Closed (133) (11,703)
=========================================================
End of period -- $ --
_________________________________________________________
=========================================================
|
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------
October 31, 2010 $154,832
---------------------------------------------------------
October 31, 2011 256,585
=========================================================
Total capital loss carryforward $411,417
_________________________________________________________
=========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-370
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 six months ended April 30, 2004 was $30,656,239 and $10,419,955, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $8,686,639 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (441,595) ============================================================================== Net unrealized appreciation of investment securities $8,245,044 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $69,232,776. |
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,354,354 $14,869,209 2,036,155 $18,695,942
------------------------------------------------------------------------------------------------------------------
Class B 965,935 10,585,199 1,811,612 16,607,284
------------------------------------------------------------------------------------------------------------------
Class C 337,169 3,667,028 599,285 5,518,092
==================================================================================================================
Issued as reinvestment of dividends:
Class A 16,908 183,308 6,293 61,880
------------------------------------------------------------------------------------------------------------------
Class B 7,752 83,269 1,275 12,449
------------------------------------------------------------------------------------------------------------------
Class C 2,291 24,578 324 3,166
==================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 74,544 828,803 71,889 675,552
------------------------------------------------------------------------------------------------------------------
Class B (75,186) (828,803) (72,485) (675,552)
==================================================================================================================
Reacquired:
Class A (487,401) (5,420,605) (834,757) (7,533,791)
------------------------------------------------------------------------------------------------------------------
Class B (162,188) (1,763,815) (439,212) (3,915,585)
------------------------------------------------------------------------------------------------------------------
Class C (57,501) (629,456) (152,851) (1,357,514)
==================================================================================================================
1,976,677 $21,598,715 3,027,528 $28,091,923
__________________________________________________________________________________________________________________
==================================================================================================================
|
FS-371
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------
SIX MONTHS DECEMBER 31, 2001
ENDED (DATE OPERATIONS
APRIL 30, YEAR ENDED COMMENCED) TO
2004 OCTOBER 31, 2003 OCTOBER 31, 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.26 $ 8.70 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07 0.06(a) (0.03)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.01 1.54 (1.27)
=========================================================================================================================
Total from investment operations 1.08 1.60 (1.30)
=========================================================================================================================
Less dividends from net investment income (0.07) (0.04) --
=========================================================================================================================
Net asset value, end of period $ 11.27 $ 10.26 $ 8.70
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 10.60% 18.39% (13.00)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $35,358 $22,375 $ 7,834
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.00%(c) 1.51% 1.75%(d)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.72%(c) 2.12% 4.26%(d)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.24%(c) 0.65% (0.34)%(d)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 17% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$29,691,708.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-372
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, 2004 OCTOBER 31, 2003 OCTOBER 31, 2002
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.17 $ 8.65 $ 10.00
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 0.00(a) (0.08)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.01 1.53 (1.27)
===============================================================================================================================
Total from investment operations 1.04 1.53 (1.35)
===============================================================================================================================
Less dividends from net investment income (0.04) (0.01) --
===============================================================================================================================
Net asset value, end of period $ 11.17 $ 10.17 $ 8.65
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 10.22% 17.67% (13.50)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $31,922 $21,582 $ 7,100
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.65%(c) 2.16% 2.40%(d)
-------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.37%(c) 2.77% 4.91%(d)
===============================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.59%(c) 0.00% (0.99)%(d)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(e) 17% 72% 42%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$26,570,566.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-373
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, 2004 OCTOBER 31, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.16 $ 8.65 $ 10.00
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 0.00(a) (0.08)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.01 1.52 (1.27)
==========================================================================================================================
Total from investment operations 1.04 1.52 (1.35)
==========================================================================================================================
Less dividends from net investment income (0.04) (0.01) --
==========================================================================================================================
Net asset value, end of period $11.16 $10.16 $ 8.65
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 10.23% 17.55% (13.50)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $9,569 $5,848 $ 1,116
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.65%(c) 2.16% 2.40%(d)
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.37%(c) 2.77% 4.91%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.59%(c) 0.00% (0.99)%(d)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(e) 17% 72% 42%
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$7,778,405.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-374
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $15,584 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment
FS-375
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-376
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.29%
AEROSPACE & DEFENSE-2.13%
Lockheed Martin Corp. 25,000 $ 1,192,500
------------------------------------------------------------------------
United Defense Industries, Inc.(a) 60,000 2,079,000
========================================================================
3,271,500
========================================================================
AIR FREIGHT & LOGISTICS-1.07%
Robinson (C.H.) Worldwide, Inc. 40,000 1,641,600
========================================================================
AIRLINES-1.16%
Southwest Airlines Co. 125,000 1,785,000
========================================================================
ALTERNATIVE CARRIERS-0.40%
PTEK Holdings, Inc.(a)(b) 60,000 610,200
========================================================================
APPAREL RETAIL-1.79%
Foot Locker, Inc. 35,000 840,000
------------------------------------------------------------------------
Hot Topic, Inc.(a) 40,000 890,400
------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 40,000 1,019,600
========================================================================
2,750,000
========================================================================
APPLICATION SOFTWARE-4.04%
Citrix Systems, Inc.(a) 125,000 2,381,250
------------------------------------------------------------------------
Fair Issac Corp. 25,000 843,000
------------------------------------------------------------------------
Intuit Inc.(a) 30,000 1,274,100
------------------------------------------------------------------------
Siebel Systems, Inc.(a) 75,000 771,000
------------------------------------------------------------------------
Synopsys, Inc.(a) 35,000 935,550
========================================================================
6,204,900
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.63%
Investors Financial Services Corp.(b) 35,000 1,360,450
------------------------------------------------------------------------
Janus Capital Group Inc. 75,000 1,140,000
========================================================================
2,500,450
========================================================================
BIOTECHNOLOGY-4.87%
Amgen Inc.(a) 15,000 844,050
------------------------------------------------------------------------
Amylin Pharmaceuticals, Inc.(a)(b) 50,000 1,120,000
------------------------------------------------------------------------
Cepheid, Inc.(a) 75,000 580,500
------------------------------------------------------------------------
Corgentech Inc.(a) 40,000 739,600
------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 30,000 1,824,900
------------------------------------------------------------------------
NPS Pharmaceuticals, Inc.(a)(b) 35,000 876,750
------------------------------------------------------------------------
Rigel Pharmaceuticals, Inc.(a)(b) 70,000 1,484,700
========================================================================
7,470,500
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
BROADCASTING & CABLE TV-6.07%
Citadel Broadcasting Co.(a) 165,000 $ 2,862,750
------------------------------------------------------------------------
Clear Channel Communications, Inc. 45,000 1,867,050
------------------------------------------------------------------------
Entercom Communications Corp.(a) 20,000 912,000
------------------------------------------------------------------------
Univision Communications Inc.-Class A(a) 65,000 2,200,250
------------------------------------------------------------------------
Westwood One, Inc.(a) 50,000 1,477,000
========================================================================
9,319,050
========================================================================
CASINOS & GAMING-0.33%
Alliance Gaming Corp.(a) 20,000 499,400
========================================================================
COMMUNICATIONS EQUIPMENT-2.00%
Cisco Systems, Inc.(a) 95,000 1,982,650
------------------------------------------------------------------------
NETGEAR, Inc.(a)(b) 100,000 1,088,000
========================================================================
3,070,650
========================================================================
COMPUTER & ELECTRONICS RETAIL-1.59%
Best Buy Co., Inc. 45,000 2,441,250
========================================================================
COMPUTER HARDWARE-0.47%
Gateway, Inc.(a) 150,000 723,000
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.62%
Applied Films Corp.(a) 40,000 952,000
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.69%
AGCO Corp.(a) 55,000 1,058,750
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.83%
Ceridian Corp.(a) 80,000 1,710,400
------------------------------------------------------------------------
DST Systems, Inc.(a) 25,000 1,103,750
------------------------------------------------------------------------
Fiserv, Inc.(a) 41,100 1,502,616
------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 60,000 1,564,200
========================================================================
5,880,966
========================================================================
DEPARTMENT STORES-0.54%
Kohl's Corp.(a) 20,000 835,800
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.09%
Cintas Corp. 40,000 1,798,400
------------------------------------------------------------------------
ITT Educational Services, Inc.(a) 35,000 1,411,550
========================================================================
3,209,950
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.75%
Rockwell Automation, Inc. 35,000 1,144,150
========================================================================
|
FS-377
MARKET
SHARES VALUE
------------------------------------------------------------------------
ELECTRONIC EQUIPMENT MANUFACTURERS-0.66%
Digital Theater Systems Inc.(a) 45,000 $ 1,006,650
========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.58%
Cherokee International Corp.(a) 60,000 894,000
========================================================================
EMPLOYMENT SERVICES-2.68%
Adecco S.A.-ADR (Switzerland)(b) 125,000 1,390,000
------------------------------------------------------------------------
Robert Half International Inc.(a) 100,000 2,727,000
========================================================================
4,117,000
========================================================================
GENERAL MERCHANDISE STORES-1.02%
Big Lots, Inc.(a) 65,000 920,400
------------------------------------------------------------------------
Fred's, Inc. 35,000 649,950
========================================================================
1,570,350
========================================================================
HEALTH CARE DISTRIBUTORS-1.07%
McKesson Corp. 50,000 1,643,000
========================================================================
HEALTH CARE EQUIPMENT-1.67%
Advanced Neuromodulation Systems, Inc.(a)(b) 25,000 681,250
------------------------------------------------------------------------
Analogic Corp. 12,000 568,200
------------------------------------------------------------------------
Baxter International Inc. 25,000 791,250
------------------------------------------------------------------------
Wilson Greatbatch Technologies, Inc.(a) 15,000 517,500
========================================================================
2,558,200
========================================================================
HEALTH CARE FACILITIES-1.50%
Select Medical Corp. 50,000 947,500
------------------------------------------------------------------------
Triad Hospitals, Inc.(a) 40,000 1,360,400
========================================================================
2,307,900
========================================================================
HEALTH CARE SERVICES-0.99%
Medco Health Solutions, Inc.(a) 25,000 885,000
------------------------------------------------------------------------
VistaCare, Inc.-Class A(a) 25,000 629,750
========================================================================
1,514,750
========================================================================
HEALTH CARE SUPPLIES-0.62%
Regeneration Technologies, Inc.(a)(b) 100,000 950,000
========================================================================
HOTELS, RESORTS & CRUISE LINES-0.97%
Interstate Hotels & Resorts, Inc.(a) 125,000 721,250
------------------------------------------------------------------------
Orbitz, Inc.-Class A(a)(b) 30,000 763,500
========================================================================
1,484,750
========================================================================
INDUSTRIAL CONGLOMERATES-1.71%
General Electric Co. 60,000 1,797,000
------------------------------------------------------------------------
Textron Inc. 15,000 827,700
========================================================================
2,624,700
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
INDUSTRIAL MACHINERY-1.57%
Illinois Tool Works Inc. 10,000 $ 862,100
------------------------------------------------------------------------
SPX Corp. 35,000 1,552,250
========================================================================
2,414,350
========================================================================
INSURANCE BROKERS-0.73%
Marsh & McLennan Cos., Inc. 25,000 1,127,500
========================================================================
INTERNET SOFTWARE & SERVICES-1.35%
United Online, Inc.(a)(b) 125,000 2,075,000
========================================================================
INVESTMENT BANKING & BROKERAGE-0.96%
Lehman Brothers Holdings Inc. 20,000 1,468,000
========================================================================
IT CONSULTING & OTHER SERVICES-1.28%
Anteon International Corp.(a) 40,000 1,248,000
------------------------------------------------------------------------
DigitalNet Holdings, Inc.(a)(b) 30,000 712,800
========================================================================
1,960,800
========================================================================
MANAGED HEALTH CARE-0.33%
Health Net Inc.(a) 20,000 508,800
========================================================================
METAL & GLASS CONTAINERS-0.78%
Anchor Glass Container Corp.(b) 75,330 1,190,967
========================================================================
MOVIES & ENTERTAINMENT-2.53%
Fox Entertainment Group, Inc.-Class A(a) 70,000 1,949,500
------------------------------------------------------------------------
Viacom Inc.-Class B 50,000 1,932,500
========================================================================
3,882,000
========================================================================
PACKAGED FOODS & MEATS-1.62%
American Italian Pasta Co.-Class A(b) 25,000 774,000
------------------------------------------------------------------------
General Mills, Inc. 35,000 1,706,250
========================================================================
2,480,250
========================================================================
PAPER PRODUCTS-1.20%
Sappi Ltd.-ADR (South Africa) 135,000 1,838,700
========================================================================
PHARMACEUTICALS-5.63%
Abbott Laboratories 25,000 1,100,500
------------------------------------------------------------------------
Able Laboratories, Inc.(a)(b) 40,000 770,000
------------------------------------------------------------------------
Barr Pharmaceuticals Inc.(a) 20,000 828,400
------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (United Kingdom) 45,000 1,890,000
------------------------------------------------------------------------
InKine Pharmaceutical Co., Inc.(a) 175,000 994,000
------------------------------------------------------------------------
IVAX Corp.(a) 25,000 532,500
------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 10,000 432,500
------------------------------------------------------------------------
Wyeth 55,000 2,093,850
========================================================================
8,641,750
========================================================================
PROPERTY & CASUALTY INSURANCE-0.48%
United National Group, Ltd.-Class A (Cayman
Islands)(a) 45,000 742,500
========================================================================
|
FS-378
MARKET
SHARES VALUE
------------------------------------------------------------------------
RESTAURANTS-0.85%
Krispy Kreme Doughnuts, Inc.(a)(b) 40,000 $ 1,300,400
========================================================================
SEMICONDUCTOR EQUIPMENT-7.52%
Applied Materials, Inc.(a) 100,000 1,823,000
------------------------------------------------------------------------
ASE Test Ltd. (Taiwan)(a) 75,000 468,000
------------------------------------------------------------------------
Entegris Inc.(a) 195,000 1,979,250
------------------------------------------------------------------------
FormFactor Inc.(a) 50,000 879,500
------------------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 400,000 3,188,000
------------------------------------------------------------------------
Novellus Systems, Inc.(a) 85,000 2,461,600
------------------------------------------------------------------------
Photronics, Inc.(a)(b) 50,000 744,500
========================================================================
11,543,850
========================================================================
SEMICONDUCTORS-12.25%
Agere Systems Inc.-Class A(a) 150,000 339,000
------------------------------------------------------------------------
AMIS Holdings, Inc.(a) 200,000 2,884,200
------------------------------------------------------------------------
Analog Devices, Inc. 50,000 2,130,000
------------------------------------------------------------------------
ChipPAC, Inc.-Class A(a)(b) 275,000 1,685,750
------------------------------------------------------------------------
Integrated Silicon Solution, Inc.(a) 50,000 686,500
------------------------------------------------------------------------
Intersil Corp.-Class A 30,000 592,500
------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 40,000 1,549,200
------------------------------------------------------------------------
Maxim Integrated Products, Inc. 70,000 3,219,300
------------------------------------------------------------------------
Microchip Technology Inc. 110,000 3,082,200
------------------------------------------------------------------------
OmniVision Technologies, Inc.(a)(b) 70,000 1,561,140
------------------------------------------------------------------------
Zoran Corp.(a)(b) 65,000 1,074,450
========================================================================
18,804,240
========================================================================
SPECIALIZED FINANCE-0.55%
Marlin Business Services Inc.(a)(b) 50,000 851,550
========================================================================
SPECIALTY STORES-1.48%
Weight Watchers International, Inc.(a)(b) 25,000 975,000
------------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 40,000 1,299,200
========================================================================
2,274,200
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
SYSTEMS SOFTWARE-3.45%
Computer Associates International, Inc. 60,000 $ 1,608,600
------------------------------------------------------------------------
Network Associates, Inc.(a) 35,000 548,800
------------------------------------------------------------------------
Oracle Corp.(a) 125,000 1,402,500
------------------------------------------------------------------------
VERITAS Software Corp.(a) 65,000 1,733,550
========================================================================
5,293,450
========================================================================
TRUCKING-1.19%
Central Freight Lines, Inc.(a) 70,000 903,000
------------------------------------------------------------------------
Sirva Inc.(a) 40,000 929,200
========================================================================
1,832,200
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $147,692,167) 146,270,923
========================================================================
MONEY MARKET FUNDS-4.85%
Liquid Assets Portfolio-Institutional
Class(c) 3,720,291 3,720,291
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 3,720,291 3,720,291
========================================================================
Total Money Market Funds (Cost
$7,440,582) 7,440,582
========================================================================
TOTAL INVESTMENTS-100.14% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $155,132,749) 153,711,505
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-9.51%
Liquid Assets Portfolio-Institutional
Class(c)(d) 14,595,804 14,595,804
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $14,595,804) 14,595,804
========================================================================
TOTAL INVESTMENTS-109.65% (Cost $169,728,553) 168,307,309
========================================================================
OTHER ASSETS LESS LIABILITIES-(9.65%) (14,808,702)
========================================================================
NET ASSETS-100.00% $153,498,607
________________________________________________________________________
========================================================================
|
Investment Abbreviation:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-379
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$147,692,167)* $146,270,923
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $22,036,386) 22,036,386
-----------------------------------------------------------
Total investments (cost $169,728,553) 168,307,309
-----------------------------------------------------------
Cash 183,258
-----------------------------------------------------------
Receivables for:
Investments sold 9,562,707
-----------------------------------------------------------
Fund shares sold 190,516
-----------------------------------------------------------
Dividends 38,472
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 20,546
-----------------------------------------------------------
Other assets 24,034
===========================================================
Total assets 178,326,842
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 9,518,792
-----------------------------------------------------------
Fund shares reacquired 416,358
-----------------------------------------------------------
Deferred compensation and retirement plans 23,180
-----------------------------------------------------------
Collateral upon return of securities loaned 14,595,804
-----------------------------------------------------------
Accrued distribution fees 85,085
-----------------------------------------------------------
Accrued trustees' fees 808
-----------------------------------------------------------
Accrued transfer agent fees 120,999
-----------------------------------------------------------
Accrued operating expenses 67,209
===========================================================
Total liabilities 24,828,235
===========================================================
Net assets applicable to shares outstanding $153,498,607
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $286,558,485
-----------------------------------------------------------
Undistributed net investment income (loss) (1,208,099)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (130,430,535)
-----------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (1,421,244)
===========================================================
$153,498,607
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 85,143,452
___________________________________________________________
===========================================================
Class B $ 49,554,566
___________________________________________________________
===========================================================
Class C $ 18,800,589
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 13,361,757
___________________________________________________________
===========================================================
Class B 7,982,133
___________________________________________________________
===========================================================
Class C 3,029,746
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 6.37
-----------------------------------------------------------
Offering price per share:
(Net asset value of $6.37 divided by
94.50%) $ 6.74
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 6.21
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 6.21
___________________________________________________________
===========================================================
|
* At April 30, 2004, securities with an aggregate market value of $13,863,513 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-380
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $45) $ 425,215
-------------------------------------------------------------------------
Dividends from affiliated money market funds* 58,782
=========================================================================
Total investment income 483,997
=========================================================================
EXPENSES:
Advisory fees 681,157
-------------------------------------------------------------------------
Administrative services fees 24,863
-------------------------------------------------------------------------
Custodian fees 23,264
-------------------------------------------------------------------------
Distribution fees:
Class A 153,532
-------------------------------------------------------------------------
Class B 260,214
-------------------------------------------------------------------------
Class C 102,484
-------------------------------------------------------------------------
Transfer agent fees 326,949
-------------------------------------------------------------------------
Trustees' fees 6,873
-------------------------------------------------------------------------
Other 96,368
=========================================================================
Total expenses 1,675,704
=========================================================================
Less: Fees waived and expense offset arrangements (3,984)
=========================================================================
Net expenses 1,671,720
=========================================================================
Net investment income (loss) (1,187,723)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 17,051,751
=========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (9,358,857)
=========================================================================
Net gain from investment securities 7,692,894
=========================================================================
Net increase in net assets resulting from operations $ 6,505,171
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-381
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,187,723) $ (2,233,801)
------------------------------------------------------------------------------------------
Net realized gain from investment securities and option
contracts 17,051,751 28,824,924
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (9,358,857) 21,408,256
==========================================================================================
Net increase in net assets resulting from operations 6,505,171 47,999,379
==========================================================================================
Share transactions-net:
Class A 99,236 4,435,295
------------------------------------------------------------------------------------------
Class B (1,291,468) (3,079,891)
------------------------------------------------------------------------------------------
Class C (2,064,835) (4,179,924)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (3,257,067) (2,824,520)
==========================================================================================
Net increase in net assets 3,248,104 45,174,859
==========================================================================================
NET ASSETS:
Beginning of period 150,250,503 105,075,644
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(1,208,099) and $(20,376) for 2004 and
2003, respectively) $153,498,607 $150,250,503
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-382
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Emerging 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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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
FS-383
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
E. 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.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO 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 0.85% of the first $1
billion of the Fund's average daily net assets plus 0.80% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.00%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.00% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. Voluntary fee waivers and/ or
reimbursements may be modified or discontinued at any time without further
notice to investors. During periods of fee waivers or reimbursements, to the
extent the annualized expense ratio does not exceed the expense limit for the
period committed, AIM will retain its ability to be reimbursed for such fee
waivers or reimbursements prior to the end of each fiscal year. 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 on
investments by the Fund in such affiliated money market funds (excluding
investments made in money market funds with cash collateral from securities
loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of
$1,278.
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 six months ended April 30, 2004, AIM was paid $24,863 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. During the six months ended April 30, 2004, AISI retained $168,650 for such services.
FS-384
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B and Class C shares paid $153,532, $260,214 and $102,484, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $25,101 in front-end sales commissions for the sale of Class A shares and $4, $1,170 and $1,191 from Class A, Class B and Class C 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--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
MARKET PROCEEDS UNREALIZED MARKET REALIZED
VALUE PURCHASE FROM APPRECIATION VALUE DIVIDEND GAIN
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional Class $ 5,063,454 $ 42,122,787 $ (43,465,950) $ -- $3,720,291 $23,369 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 5,063,454 42,122,787 (43,465,950) -- 3,720,291 22,785 --
==================================================================================================================================
Subtotal $10,126,908 $ 84,245,574 $ (86,931,900) $ -- $7,440,582 $46,154 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
MARKET PROCEEDS UNREALIZED MARKET REALIZED
VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND GAIN
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME* (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional Class $ 7,368,309 $ 60,778,342 $ (53,550,847) $ -- $14,595,804 $12,628 $ --
==================================================================================================================================
Total $17,495,217 $145,023,916 $(140,482,747) $ -- $22,036,386 $58,782 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $82,519.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $1,265 and reductions in custodian fees of $1,441 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $2,706.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
FS-385
During the six months ended April 30, 2004, the Fund paid legal fees of $2,525 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $13,863,513 were on loan to brokers. The loans were secured by cash collateral of $14,595,804 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $12,628 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------
October 31, 2009 $101,674,105
-----------------------------------------------------------
October 31, 2010 45,298,855
===========================================================
Total capital loss carryforward $146,972,960
___________________________________________________________
===========================================================
|
*Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
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 six months ended April 30, 2004 was $231,791,193 and $230,115,910, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 6,047,766
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (7,566,523)
===========================================================
Net unrealized appreciation (depreciation) of
investment securities $(1,518,757)
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $169,826,066.
|
FS-386
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
-----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2004 2003
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,580,149 $ 16,897,265 14,150,001 $ 71,539,332
-----------------------------------------------------------------------------------------------------------------------
Class B 736,332 4,722,072 2,662,059 13,233,376
-----------------------------------------------------------------------------------------------------------------------
Class C 458,419 2,950,845 1,160,403 5,839,097
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 69,295 464,515 165,304 856,537
-----------------------------------------------------------------------------------------------------------------------
Class B (71,055) (464,515) (168,817) (856,537)
=======================================================================================================================
Reacquired:
Class A (2,622,575) (17,262,544) (13,569,593) (67,960,574)
-----------------------------------------------------------------------------------------------------------------------
Class B (864,805) (5,549,025) (3,214,850) (15,456,730)
-----------------------------------------------------------------------------------------------------------------------
Class C (780,139) (5,015,680) (2,057,518) (10,019,021)
=======================================================================================================================
(494,379) $ (3,257,067) (873,011) $ (2,824,520)
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------
MARCH 31, 2000
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.11 $ 4.12 $ 5.46 $ 10.50 $ 10.00
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.07)(a) (0.08)(a) (0.10) (0.04)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.30 2.06 (1.26) (4.51) 0.54
===============================================================================================================================
Total from investment operations 0.26 1.99 (1.34) (4.61) 0.50
===============================================================================================================================
Less distributions from net realized gains -- -- -- (0.43) --
===============================================================================================================================
Net asset value, end of period $ 6.37 $ 6.11 $ 4.12 $ 5.46 $ 10.50
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 4.26% 48.30% (24.54)% (45.37)% 5.00%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $85,143 $81,428 $51,822 $81,114 $147,101
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.80%(c) 2.07% 1.89% 1.71%(d) 1.68%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.19)%(c) (1.48)% (1.54)% (1.32)% (1.04)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 153% 414% 407% 242% 111%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. 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 $88,214,794.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 1.83%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-387
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------------------------
MARCH 31, 2000
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.97 $ 4.05 $ 5.40 $ 10.47 $ 10.00
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.10)(a) (0.12)(a) (0.14) (0.07)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.30 2.02 (1.23) (4.50) 0.54
===============================================================================================================================
Total from investment operations 0.24 1.92 (1.35) (4.64) 0.47
===============================================================================================================================
Less distributions from net realized gains -- -- -- (0.43) --
===============================================================================================================================
Net asset value, end of period $ 6.21 $ 5.97 $ 4.05 $ 5.40 $ 10.47
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 4.02% 47.41% (25.00)% (45.81)% 4.70%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $49,555 $48,830 $36,060 $58,019 $94,740
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 2.45%(c) 2.72% 2.55% 2.36%(d) 2.37%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.84)%(c) (2.13)% (2.19)% (1.98)% (1.73)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 153% 414% 407% 242% 111%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. 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 $52,328,763.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 2.48%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-388
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------------
MARCH 31, 2000
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.97 $ 4.05 $ 5.40 $ 10.46 $ 10.00
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.10)(a) (0.12)(a) (0.14) (0.07)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.30 2.02 (1.23) (4.49) 0.53
===============================================================================================================================
Total from investment operations 0.24 1.92 (1.35) (4.63) 0.46
===============================================================================================================================
Less distributions from net realized gains -- -- -- (0.43) --
===============================================================================================================================
Net asset value, end of period $ 6.21 $ 5.97 $ 4.05 $ 5.40 $ 10.46
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 4.02% 47.41% (25.00)% (45.76)% 4.60%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,801 $19,992 $17,194 $26,483 $41,361
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 2.45%(c) 2.72% 2.55% 2.36%(d) 2.37%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.84)%(c) (2.13)% (2.19)% (1.98)% (1.73)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 153% 414% 407% 242% 111%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. 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 $20,609,342.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 2.48%.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the
FS-389
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $18,707 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale.
FS-390
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-391
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.81%
ADVERTISING-5.23%
Interpublic Group of Cos., Inc. (The)(a) 572,200 $ 8,977,818
-----------------------------------------------------------------------
Omnicom Group Inc. 120,600 9,588,906
=======================================================================
18,566,724
=======================================================================
AEROSPACE & DEFENSE-1.85%
Honeywell International Inc. 190,300 6,580,574
=======================================================================
ALUMINUM-0.89%
Alcoa Inc. 102,500 3,151,875
=======================================================================
APPAREL RETAIL-1.85%
Gap, Inc. (The) 298,700 6,574,387
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.83%
Bank of New York Co., Inc. (The) 223,600 6,515,704
=======================================================================
BUILDING PRODUCTS-1.88%
Masco Corp. 239,000 6,694,390
=======================================================================
COMMUNICATIONS EQUIPMENT-1.13%
Motorola, Inc. 219,200 4,000,400
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.97%
Deere & Co. 50,800 3,456,432
=======================================================================
CONSUMER ELECTRONICS-3.48%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 193,970 5,200,336
-----------------------------------------------------------------------
Sony Corp.- ADR (Japan) 186,700 7,169,280
=======================================================================
12,369,616
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-5.28%
Ceridian Corp.(a) 294,700 6,300,686
-----------------------------------------------------------------------
First Data Corp. 274,700 12,468,633
=======================================================================
18,769,319
=======================================================================
DEPARTMENT STORES-1.45%
May Department Stores Co. (The) 166,800 5,137,440
=======================================================================
DIVERSIFIED BANKS-1.90%
Bank One Corp. 136,800 6,753,816
=======================================================================
DIVERSIFIED CAPITAL MARKETS-1.46%
J.P. Morgan Chase & Co. 137,500 5,170,000
=======================================================================
DIVERSIFIED CHEMICALS-0.60%
Dow Chemical Co. (The) 53,600 2,127,384
=======================================================================
|
-----------------------------------------------------------------------
MARKET
SHARES VALUE
DIVERSIFIED COMMERCIAL SERVICES-2.95%
Cendant Corp. 442,600 $ 10,480,768
=======================================================================
ENVIRONMENTAL SERVICES-3.06%
Waste Management, Inc. 382,550 10,864,420
=======================================================================
FOOD RETAIL-3.59%
Kroger Co. (The)(a) 407,600 7,133,000
-----------------------------------------------------------------------
Safeway Inc.(a) 244,800 5,618,160
=======================================================================
12,751,160
=======================================================================
GENERAL MERCHANDISE STORES-2.21%
Target Corp. 181,100 7,854,307
=======================================================================
HEALTH CARE DISTRIBUTORS-5.60%
Cardinal Health, Inc. 167,600 12,276,700
-----------------------------------------------------------------------
McKesson Corp. 232,100 7,626,806
=======================================================================
19,903,506
=======================================================================
HEALTH CARE EQUIPMENT-1.49%
Baxter International Inc. 166,800 5,279,220
=======================================================================
HEALTH CARE FACILITIES-1.95%
HCA Inc. 170,400 6,923,352
=======================================================================
INDUSTRIAL CONGLOMERATES-5.81%
General Electric Co. 225,500 6,753,725
-----------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 505,800 13,884,210
=======================================================================
20,637,935
=======================================================================
INDUSTRIAL MACHINERY-2.32%
Illinois Tool Works Inc. 95,515 8,234,348
=======================================================================
INSURANCE BROKERS-1.49%
Aon Corp. 202,600 5,279,756
=======================================================================
INVESTMENT BANKING & BROKERAGE-3.98%
Merrill Lynch & Co., Inc. 124,800 6,767,904
-----------------------------------------------------------------------
Morgan Stanley 143,200 7,359,048
=======================================================================
14,126,952
=======================================================================
MANAGED HEALTH CARE-2.17%
Anthem, Inc.(a) 87,000 7,706,460
=======================================================================
MOVIES & ENTERTAINMENT-2.34%
Walt Disney Co. (The) 360,100 8,293,103
=======================================================================
MULTI-LINE INSURANCE-1.44%
Hartford Financial Services Group, Inc. (The) 83,600 5,106,288
=======================================================================
|
FS-392
MARKET
SHARES VALUE
-----------------------------------------------------------------------
OIL & GAS DRILLING-1.97%
Transocean Inc. (Cayman Islands)(a) 251,377 $ 6,980,739
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-3.72%
Halliburton Co. 223,600 6,663,280
-----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 112,100 6,561,213
=======================================================================
13,224,493
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.20%
Citigroup Inc. 236,619 11,379,008
=======================================================================
PACKAGED FOODS & MEATS-1.60%
Kraft Foods Inc.-Class A 172,300 5,670,393
=======================================================================
PHARMACEUTICALS-6.19%
Aventis S.A. (France)(a)(b) 126,700 9,591,440
-----------------------------------------------------------------------
Pfizer Inc. 172,000 6,150,720
-----------------------------------------------------------------------
Wyeth 164,300 6,254,901
=======================================================================
21,997,061
=======================================================================
|
-----------------------------------------------------------------------
MARKET
SHARES VALUE
PROPERTY & CASUALTY INSURANCE-2.52%
ACE Ltd. (Cayman Islands) 203,800 $ 8,934,592
=======================================================================
SYSTEMS SOFTWARE-3.10%
Computer Associates International, Inc. 410,900 11,016,229
=======================================================================
THRIFTS & MORTGAGE FINANCE-3.31%
Fannie Mae 171,300 11,771,736
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $286,096,818) 340,283,887
=======================================================================
MONEY MARKET FUNDS-2.48%
Liquid Assets Portfolio-Institutional
Class(c) 4,411,356 4,411,356
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 4,411,356 4,411,356
=======================================================================
Total Money Market Funds (Cost
$8,822,712) 8,822,712
=======================================================================
TOTAL INVESTMENTS-98.29% (Cost $294,919,530) 349,106,599
=======================================================================
OTHER ASSETS LESS LIABILITIES-1.71% 6,056,346
=======================================================================
NET ASSETS-100.00% $355,162,945
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the
Board of Trustees. The market value of the security at 04/30/04 was 2.70% of
the Fund's total investments. See Note 1A.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying notes which are an integral part of the financial statements.
FS-393
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$286,096,818) $340,283,887
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $8,822,712) 8,822,712
===========================================================
Total investments (cost $294,919,530) 349,106,599
===========================================================
Receivables for:
Fund shares sold 6,667,563
-----------------------------------------------------------
Dividends 367,110
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 54,489
-----------------------------------------------------------
Other assets 63,392
===========================================================
Total assets 356,259,153
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 656,600
-----------------------------------------------------------
Deferred compensation and retirement plans 65,619
-----------------------------------------------------------
Accrued distribution fees 173,485
-----------------------------------------------------------
Accrued trustees' fees 1,043
-----------------------------------------------------------
Accrued transfer agent fees 158,727
-----------------------------------------------------------
Accrued operating expenses 40,734
===========================================================
Total liabilities 1,096,208
===========================================================
Net assets applicable to shares outstanding $355,162,945
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $319,866,964
-----------------------------------------------------------
Undistributed net investment income (loss) (319,513)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (18,571,575)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 54,187,069
===========================================================
$355,162,945
___________________________________________________________
===========================================================
NET ASSETS:
Class A $156,761,061
___________________________________________________________
===========================================================
Class B $ 92,344,220
___________________________________________________________
===========================================================
Class C $ 32,546,083
___________________________________________________________
===========================================================
Class R $ 762,460
___________________________________________________________
===========================================================
Investor Class $ 72,562,270
___________________________________________________________
===========================================================
Institutional Class $ 186,851
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 12,419,657
___________________________________________________________
===========================================================
Class B 7,497,378
___________________________________________________________
===========================================================
Class C 2,642,998
___________________________________________________________
===========================================================
Class R 60,617
___________________________________________________________
===========================================================
Investor Class 5,746,029
___________________________________________________________
===========================================================
Institutional Class 14,806
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 12.62
-----------------------------------------------------------
Offering price per share:
(Net asset value of $12.62 divided
by 94.50%) $ 13.35
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.32
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.31
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 12.58
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 12.63
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 12.62
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-394
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $22,910) $ 2,307,158
-------------------------------------------------------------------------
Dividends from affiliated money market funds 56,625
=========================================================================
Total investment income 2,363,783
=========================================================================
EXPENSES:
Advisory fees 1,023,020
-------------------------------------------------------------------------
Administrative services fees 59,106
-------------------------------------------------------------------------
Custodian fees 32,628
-------------------------------------------------------------------------
Distribution fees:
Class A 246,572
-------------------------------------------------------------------------
Class B 447,179
-------------------------------------------------------------------------
Class C 155,320
-------------------------------------------------------------------------
Class R 1,670
-------------------------------------------------------------------------
Investor Class 98,676
-------------------------------------------------------------------------
Transfer agent fees 430,180
-------------------------------------------------------------------------
Trustees' fees 7,664
-------------------------------------------------------------------------
Other 159,502
=========================================================================
Total expenses 2,661,517
=========================================================================
Less: Fees waived and expense offset arrangements (3,439)
-------------------------------------------------------------------------
Net expenses 2,658,078
=========================================================================
Net investment income (loss) (294,295)
=========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES, AND
FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 8,179,091
-------------------------------------------------------------------------
Foreign currencies 18,962
=========================================================================
8,198,053
=========================================================================
Change in net unrealized appreciation of investment
securities 26,005,506
=========================================================================
Net gain from investment securities and foreign currencies 34,203,559
=========================================================================
Net increase in net assets resulting from operations $33,909,264
_________________________________________________________________________
=========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-395
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (294,295) $ (639,955)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 8,198,053 (9,793,824)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 26,005,506 51,420,584
==========================================================================================
Net increase in net assets resulting from operations 33,909,264 40,986,805
==========================================================================================
Share transactions-net:
Class A 21,306,008 5,382,960
------------------------------------------------------------------------------------------
Class B 3,839,106 2,113,303
------------------------------------------------------------------------------------------
Class C 3,059,196 (14,173)
------------------------------------------------------------------------------------------
Class R 115,579 537,385
------------------------------------------------------------------------------------------
Investor Class 63,416,868 177,572
------------------------------------------------------------------------------------------
Institutional Class 186,851 --
==========================================================================================
Net increase in net assets resulting from share
transactions 91,923,608 8,197,047
==========================================================================================
Net increase in net assets 125,832,872 49,183,852
==========================================================================================
NET ASSETS:
Beginning of period 229,330,073 180,146,221
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(319,513) and $(25,218) for 2004 and
2003, respectively) $355,162,945 $229,330,073
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-396
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Large Cap Basic Value 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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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
FS-397
recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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 FEES PAID TO 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 0.60% of the first $1 billion of the Fund's average daily net assets, plus 0.575% over $1 billion up to and including $2 billion of the Fund's average daily net assets and 0.55% of the Fund's average daily net assets in excess of $2 billion. 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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $1,012.
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 six months ended April 30, 2004, AIM was paid $59,106 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 six months ended April 30, 2004, AISI retained $177,257 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, Investor Class and Institutional Class shares of the Fund. Institutional Class shares commenced sales on April 30, 2004. 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 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,
FS-398
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $246,572, $447,179, $155,320, $1,670 and $98,676, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $45,290 in front-end sales commissions from the sale of Class A shares and $507, $794, $1,519 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--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
--------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $1,921,637 $22,797,866 $(20,308,147) $ -- $4,411,356 $27,900 $ --
--------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 1,921,637 22,797,866 (20,308,147) -- 4,411,356 26,763 --
================================================================================================================================
Subtotal $3,843,274 $45,595,732 $(40,616,294) $ -- $8,822,712 $54,663 $ --
================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $3,248,000 $35,970,800 $(39,218,800) $ -- $ -- $ 1,962 $ --
---------------------------------------------------------------------------------------------------------------------------------
Total $7,091,274 $81,566,532 $(79,835,094) $ -- $8,822,712 $56,625 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(*) Dividend income is net of fees paid to security lending counterparties of $19,592.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $2,422 and reductions in custodian fees of $5 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $2,427.
NOTE 5--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
NOTE 5--TRUSTEES' FEES (CONTINUED)
defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
FS-399
NOTE 5--TRUSTEES' FEES (CONTINUED)
During the six months ended April 30, 2004, the Fund paid legal fees of $2,693 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, there were no securities on loan to brokers. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $1,962 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilized. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------
October 31, 2009 $ 2,651,488
---------------------------------------------------------
October 31, 2010 13,408,092
---------------------------------------------------------
October 31, 2011 8,530,524
=========================================================
Total capital loss carryforward $24,590,104
_________________________________________________________
=========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-400
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 six months ended April 30, 2004 was $74,729,411 and $80,367,146, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
---------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $56,951,741
---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (4,827,265)
===========================================================================
Net unrealized appreciation of investment securities $52,124,476
___________________________________________________________________________
===========================================================================
Cost of investments for tax purposes is $296,982,123.
|
NOTE 10--SHARE INFORMATION
The Fund currently offers six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, Investor Class shares and 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, Investor Class shares and 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
SIX MONTHS ENDED OCTOBER 31,
APRIL 30, 2004 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,751,070 $ 34,294,775 5,695,229 $ 56,588,456
----------------------------------------------------------------------------------------------------------------------
Class B 1,222,622 14,907,135 2,611,379 25,467,901
----------------------------------------------------------------------------------------------------------------------
Class C 481,836 5,837,916 936,198 9,069,047
----------------------------------------------------------------------------------------------------------------------
Class R 22,739 280,308 59,714 632,113
----------------------------------------------------------------------------------------------------------------------
Investor Class 941,307 11,785,558 30,507 346,714
----------------------------------------------------------------------------------------------------------------------
Institutional Class* 14,806 186,851 -- --
======================================================================================================================
Issued in connection with acquisitions:**
Class A 23,582 268,604 -- --
----------------------------------------------------------------------------------------------------------------------
Class B 31,404 350,200 -- --
----------------------------------------------------------------------------------------------------------------------
Class C 100,704 1,122,781 -- --
----------------------------------------------------------------------------------------------------------------------
Investor Class 7,662,600 87,273,020 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 242,124 3,044,516 315,247 3,158,288
----------------------------------------------------------------------------------------------------------------------
Class B (247,807) (3,044,516) (321,047) (3,158,288)
======================================================================================================================
Reacquired:
Class A (1,305,479) (16,301,887) (5,558,986) (54,363,784)
----------------------------------------------------------------------------------------------------------------------
Class B (683,709) (8,373,713) (2,170,734) (20,196,310)
----------------------------------------------------------------------------------------------------------------------
Class C (322,239) (3,901,501) (955,066) (9,083,220)
----------------------------------------------------------------------------------------------------------------------
Class R (13,835) (164,729) (8,863) (94,728)
----------------------------------------------------------------------------------------------------------------------
Investor Class (2,873,535) (35,641,710) (14,850) (169,142)
======================================================================================================================
8,048,190 $ 91,923,608 618,728 $ 8,197,047
______________________________________________________________________________________________________________________
======================================================================================================================
|
* Institutional Class shares commenced sales on April 30, 2004. ** As of the opening of business on November 3, 2003, the Fund acquired all of the net assets of INVESCO Value Equity Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on June 11, 2003 and INVESCO Value Equity Fund shareholders on October 21, 2003. The acquisition was accomplished by a tax-free exchange of 7,818,290 shares of the Fund for 4,958,149 shares of INVESCO Value Equity Fund outstanding as of the close of business October 31, 2003. INVESCO Value Equity Fund's net assets at that date of $89,014,605 including $14,973,392 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $229,149,218.
FS-401
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------------------------------
JUNE 30, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, -------------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.39 $ 9.20 $ 10.94 $ 12.05 $ 9.40 $10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00 (0.00)(a) 0.01(a) 0.02(a) 0.07(a) 0.03
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.23 2.19 (1.75) (1.07) 2.88 (0.63)
=================================================================================================================================
Total from investment operations 1.23 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 $ 12.62 $ 11.39 $ 9.20 $ 10.94 $12.05 $ 9.40
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.80% 23.80% (15.90)% (8.74)% 32.21% (6.00)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $156,761 $121,980 $94,387 $68,676 $5,888 $1,153
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers 1.35%(c) 1.42% 1.38% 1.27% 1.25% 1.25%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.35%(c) 1.42% 1.38% 1.36% 8.21% 10.02%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets 0.03%(c) (0.01)% 0.11% 0.17% 0.62% 0.87%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 31% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$141,672,423.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS B
-------------------------------------------------------------------------
AUGUST 1, 2000
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.15 $ 9.07 $ 10.86 $ 12.02 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.21 2.15 (1.73) (1.05) 1.17
=================================================================================================================================
Total from investment operations 1.17 2.08 (1.79) (1.11) 1.17
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.03) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.02) --
=================================================================================================================================
Total distributions -- -- -- (0.05) --
=================================================================================================================================
Net asset value, end of period $ 12.32 $ 11.15 $ 9.07 $ 10.86 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.49% 22.93% (16.48)% (9.25)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $92,344 $80,018 $63,977 $58,681 $2,815
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.00%(c) 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.62)%(c) (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 31% 41% 37% 18% 57%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$89,927,305.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-402
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------------------
AUGUST 1, 2000
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED)
APRIL 30, ----------------------------------- TO OCTOBER 31,
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.15 $ 9.07 $ 10.85 $ 12.02 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.20 2.15 (1.72) (1.06) 1.17
=================================================================================================================================
Total from investment operations 1.16 2.08 (1.78) (1.12) 1.17
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.03) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.02) --
=================================================================================================================================
Total distributions -- -- -- (0.05) --
=================================================================================================================================
Net asset value, end of period $ 12.31 $ 11.15 $ 9.07 $ 10.85 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.40% 22.93% (16.41)% (9.33)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,546 $26,566 $21,775 $20,680 $1,248
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.00%(c) 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.62)%(c) (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 31% 41% 37% 18% 57%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$31,234,640.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-403
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
------------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL OCTOBER 31, OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.36 $ 9.20 $ 11.60
--------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.02)(a) (0.00)(a)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.23 2.18 (2.40)
==============================================================================================================
Total from investment operations 1.22 2.16 (2.40)
==============================================================================================================
Net asset value, end of period $12.58 $11.36 $ 9.20
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 10.74% 23.48% (20.69)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 762 $ 588 $ 8
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets: 1.50%(c) 1.57% 1.54%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.12)%(c) (0.16)% (0.05)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 31% 41% 37%
______________________________________________________________________________________________________________
==============================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $671,478.
(d) Annualized.
(e) Not annualized for periods less than one year.
INVESTOR CLASS
-----------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2004 2003
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.39 $10.98
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.38 0.00(a)
=================================================================================================
Net gains on securities (both realized and unrealized) 0.86 0.41
=================================================================================================
Total from investment operations 1.24 0.41
=================================================================================================
Net asset value, end of period $ 12.63 $11.39
_________________________________________________________________________________________________
=================================================================================================
Total return(b) 10.89% 3.73%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $72,562 $ 178
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets: 1.25%(c) 1.25%(d)
=================================================================================================
Ratio of net investment income to average net assets 0.13%(c) 0.16%(d)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(e) 31% 41%
_________________________________________________________________________________________________
=================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$79,374,552.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-404
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $12.62
===================================================================================
Net investment income --
===================================================================================
Less dividends from net investment income --
===================================================================================
Net asset value, end of period $12.62
___________________________________________________________________________________
===================================================================================
Total return --
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 187
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets:
With fee waivers --
-----------------------------------------------------------------------------------
Without fee waivers --
===================================================================================
Ratio of net investment income to average net assets --
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(a) 31%
___________________________________________________________________________________
===================================================================================
|
(a) Not annualized for periods less than one year.
FS-405
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $24,233 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc.,
FS-406
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-407
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.04%
AEROSPACE & DEFENSE-1.63%
Rockwell Collins, Inc. 140,000 $ 4,515,000
------------------------------------------------------------------------
United Technologies Corp. 88,200 7,608,132
========================================================================
12,123,132
========================================================================
APPAREL RETAIL-2.36%
Gap, Inc. (The) 586,000 12,897,860
------------------------------------------------------------------------
Limited Brands 229,000 4,726,560
========================================================================
17,624,420
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.91%
Coach, Inc.(a) 335,000 14,271,000
========================================================================
APPLICATION SOFTWARE-0.79%
Amdocs Ltd. (United Kingdom)(a) 222,000 5,894,100
========================================================================
BIOTECHNOLOGY-1.99%
Genentech, Inc.(a) 121,000 14,858,800
========================================================================
BUILDING PRODUCTS-1.27%
American Standard Cos. Inc.(a) 45,000 4,733,550
------------------------------------------------------------------------
Masco Corp. 170,000 4,761,700
========================================================================
9,495,250
========================================================================
CASINOS & GAMING-3.14%
International Game Technology 619,300 23,372,382
========================================================================
COMMUNICATIONS EQUIPMENT-8.37%
Avaya Inc.(a) 539,000 7,373,520
------------------------------------------------------------------------
Cisco Systems, Inc.(a) 1,475,440 30,792,433
------------------------------------------------------------------------
Juniper Networks, Inc.(b) 188,000 4,113,440
------------------------------------------------------------------------
Lucent Technologies Inc.(b) 2,120,000 7,144,400
------------------------------------------------------------------------
Motorola, Inc. 367,000 6,697,750
------------------------------------------------------------------------
QUALCOMM Inc. 101,000 6,308,460
========================================================================
62,430,003
========================================================================
COMPUTER & ELECTRONICS RETAIL-0.58%
RadioShack Corp. 141,000 4,337,160
========================================================================
COMPUTER HARDWARE-2.22%
Dell Inc.(a) 476,600 16,542,786
========================================================================
CONSUMER ELECTRONICS-1.35%
Harman International Industries, Inc. 133,000 10,088,050
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
CONSUMER FINANCE-1.97%
American Express Co. 103,300 $ 5,056,535
------------------------------------------------------------------------
Capital One Financial Corp. 76,000 4,980,280
------------------------------------------------------------------------
MBNA Corp. 190,000 4,632,200
========================================================================
14,669,015
========================================================================
DEPARTMENT STORES-2.45%
J.C. Penney Co., Inc. 195,000 6,602,700
------------------------------------------------------------------------
Nordstrom, Inc. 328,000 11,686,640
========================================================================
18,289,340
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-6.57%
Apollo Group, Inc.-Class A(a) 271,800 24,701,184
------------------------------------------------------------------------
Cendant Corp. 1,024,000 24,248,320
========================================================================
48,949,504
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.88%
Rockwell Automation, Inc. 200,000 6,538,000
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.70%
Waters Corp.(a) 120,000 5,178,000
========================================================================
FOOTWEAR-1.14%
NIKE, Inc.-Class B 118,000 8,490,100
========================================================================
HEALTH CARE EQUIPMENT-10.65%
Bard (C.R.), Inc. 50,000 5,313,500
------------------------------------------------------------------------
Becton, Dickinson & Co. 165,000 8,340,750
------------------------------------------------------------------------
Boston Scientific Corp.(a) 241,600 9,951,504
------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 135,200 10,310,352
------------------------------------------------------------------------
Stryker Corp. 101,300 10,021,609
------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 145,000 12,446,800
------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 288,100 23,004,785
========================================================================
79,389,300
========================================================================
HEALTH CARE SERVICES-2.22%
Caremark Rx, Inc.(a) 140,000 4,739,000
------------------------------------------------------------------------
IMS Health Inc. 467,000 11,791,750
========================================================================
16,530,750
========================================================================
HEALTH CARE SUPPLIES-1.57%
Alcon, Inc. (Switzerland) 157,700 11,709,225
========================================================================
HOME IMPROVEMENT RETAIL-0.87%
Home Depot, Inc. (The) 185,000 6,510,150
========================================================================
|
FS-408
MARKET
SHARES VALUE
------------------------------------------------------------------------
HOMEBUILDING-0.66%
Pulte Homes, Inc. 100,000 $ 4,917,000
========================================================================
HOUSEHOLD PRODUCTS-1.53%
Procter & Gamble Co. (The) 108,000 11,421,000
========================================================================
HOUSEWARES & SPECIALTIES-1.97%
Fortune Brands, Inc. 193,000 14,716,250
========================================================================
INDUSTRIAL CONGLOMERATES-2.78%
3M Co. 189,000 16,344,720
------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 160,000 4,392,000
========================================================================
20,736,720
========================================================================
INDUSTRIAL MACHINERY-0.65%
Danaher Corp. 52,000 4,811,040
========================================================================
INTERNET RETAIL-1.27%
eBay Inc.(a) 119,000 9,498,580
========================================================================
INTERNET SOFTWARE & SERVICES-1.69%
Yahoo! Inc.(a) 249,600 12,594,816
========================================================================
INVESTMENT BANKING & BROKERAGE-0.58%
Goldman Sachs Group, Inc. (The) 45,000 4,353,750
========================================================================
IT CONSULTING & OTHER SERVICES-1.00%
Accenture Ltd.-Class A (Bermuda)(a) 312,000 7,416,240
========================================================================
MANAGED HEALTH CARE-4.53%
UnitedHealth Group Inc. 549,000 33,752,520
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.38%
Citigroup Inc. 213,221 10,253,798
========================================================================
PERSONAL PRODUCTS-2.97%
Avon Products, Inc. 76,400 6,417,600
------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 120,000 5,485,200
------------------------------------------------------------------------
Gillette Co. (The) 251,000 10,270,920
========================================================================
22,173,720
========================================================================
PHARMACEUTICALS-2.67%
Forest Laboratories, Inc.(a) 79,000 5,093,920
------------------------------------------------------------------------
Johnson & Johnson 180,000 9,725,400
------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel)(b) 83,000 5,109,480
========================================================================
19,928,800
========================================================================
PROPERTY & CASUALTY INSURANCE-0.61%
Progressive Corp. (The) 52,000 4,551,040
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
RESTAURANTS-4.11%
McDonald's Corp. 536,000 $ 14,595,280
------------------------------------------------------------------------
Starbucks Corp.(a) 152,000 5,906,720
------------------------------------------------------------------------
Yum! Brands, Inc.(a) 261,000 10,124,190
========================================================================
30,626,190
========================================================================
SEMICONDUCTORS-3.45%
Altera Corp.(a) 253,300 5,068,533
------------------------------------------------------------------------
Analog Devices, Inc. 95,300 4,059,780
------------------------------------------------------------------------
Intel Corp. 149,000 3,833,770
------------------------------------------------------------------------
Texas Instruments Inc. 358,000 8,985,800
------------------------------------------------------------------------
Xilinx, Inc.(a) 112,000 3,766,560
========================================================================
25,714,443
========================================================================
SOFT DRINKS-2.75%
Pepsi Bottling Group, Inc. (The) 262,000 7,668,740
------------------------------------------------------------------------
PepsiCo, Inc. 235,000 12,805,150
========================================================================
20,473,890
========================================================================
SPECIALTY STORES-0.60%
Staples, Inc. 173,800 4,477,088
========================================================================
SYSTEMS SOFTWARE-5.10%
Adobe Systems Inc. 141,600 5,853,744
------------------------------------------------------------------------
Microsoft Corp. 429,280 11,148,401
------------------------------------------------------------------------
Oracle Corp.(a) 389,000 4,364,580
------------------------------------------------------------------------
Symantec Corp.(a) 369,000 16,623,450
========================================================================
37,990,175
========================================================================
THRIFTS & MORTGAGE FINANCE-1.45%
Golden West Financial Corp. 103,000 10,826,330
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.66%
Nextel Communications, Inc.-Class A(a) 520,000 12,407,200
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $625,798,250) 730,931,057
========================================================================
MONEY MARKET FUNDS-1.91%
Liquid Assets Portfolio-Institutional
Class(c) 7,098,878 7,098,878
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 7,098,878 7,098,878
========================================================================
Total Money Market Funds (Cost $14,197,756) 14,197,756
========================================================================
TOTAL INVESTMENTS-99.95% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $639,996,006) 745,128,813
========================================================================
|
FS-409
MARKET
SHARES VALUE
------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.79%
Liquid Assets Portfolio-Institutional
Class(c)(d) 13,368,938 $ 13,368,938
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $13,368,938) 13,368,938
========================================================================
TOTAL INVESTMENTS-101.74% (Cost $653,364,944) 758,497,751
========================================================================
OTHER ASSETS LESS LIABILITIES-(1.74%) (12,939,603)
========================================================================
NET ASSETS-100.00% $745,558,148
________________________________________________________________________
========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security was pledged as collateral for securities
lending transactions at April 30, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-410
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$625,798,250)* $ 730,931,057
------------------------------------------------------------
Investments in affiliated money market funds
(cost $27,566,694) 27,566,694
============================================================
Total investments (cost $653,364,944) 758,497,751
============================================================
Receivables for:
Investments sold 2,493,766
------------------------------------------------------------
Fund shares sold 998,884
------------------------------------------------------------
Dividends 355,783
------------------------------------------------------------
Amount due from advisor 145,972
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 159,045
------------------------------------------------------------
Other assets 64,970
============================================================
Total assets 762,716,171
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,527,872
------------------------------------------------------------
Fund shares reacquired 1,074,720
------------------------------------------------------------
Deferred compensation and retirement plans 192,491
------------------------------------------------------------
Collateral upon return of securities loaned 13,368,938
------------------------------------------------------------
Accrued distribution fees 258,601
------------------------------------------------------------
Accrued trustees' fees 1,504
------------------------------------------------------------
Accrued transfer agent fees 703,200
------------------------------------------------------------
Accrued operating expenses 30,697
============================================================
Total liabilities 17,158,023
============================================================
Net assets applicable to shares outstanding $ 745,558,148
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 968,768,141
------------------------------------------------------------
Undistributed net investment income (loss) (3,462,276)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (324,880,524)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 105,132,807
============================================================
$ 745,558,148
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 172,249,413
____________________________________________________________
============================================================
Class B $ 119,765,718
____________________________________________________________
============================================================
Class C $ 50,533,585
____________________________________________________________
============================================================
Class R $ 2,483,499
____________________________________________________________
============================================================
Investor Class $ 400,311,356
____________________________________________________________
============================================================
Institutional Class $ 214,577
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 18,857,703
____________________________________________________________
============================================================
Class B 13,561,165
____________________________________________________________
============================================================
Class C 5,718,971
____________________________________________________________
============================================================
Class R 272,547
____________________________________________________________
============================================================
Investor Class 43,678,938
____________________________________________________________
============================================================
Institutional Class 23,502
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.13
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.13 divided by
94.50%) $ 9.66
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.83
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.84
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.11
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 9.16
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.13
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $12,274,868 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-411
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $47,335) $ 1,940,560
--------------------------------------------------------------------------
Dividends from affiliated money market funds* 109,170
==========================================================================
Total investment income 2,049,730
==========================================================================
EXPENSES:
Advisory fees 2,850,279
--------------------------------------------------------------------------
Administrative services fees 107,299
--------------------------------------------------------------------------
Custodian fees 29,399
--------------------------------------------------------------------------
Distribution fees:
Class A 296,031
--------------------------------------------------------------------------
Class B 616,425
--------------------------------------------------------------------------
Class C 248,316
--------------------------------------------------------------------------
Class R 5,641
--------------------------------------------------------------------------
Investor Class 459,396
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R and Investor Class 1,496,143
--------------------------------------------------------------------------
Trustees' fees 10,197
--------------------------------------------------------------------------
Other 190,934
==========================================================================
Total expenses 6,310,060
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (830,923)
==========================================================================
Net expenses 5,479,137
==========================================================================
Net investment income (loss) (3,429,407)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 77,315,908
--------------------------------------------------------------------------
Foreign currencies (27,375)
==========================================================================
77,288,533
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (51,388,506)
--------------------------------------------------------------------------
Foreign currencies (11)
==========================================================================
(51,388,517)
==========================================================================
Net gain from investment securities and foreign currencies 25,900,016
==========================================================================
Net increase in net assets resulting from operations $ 22,470,609
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-412
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (3,429,407) $ (3,634,169)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
futures contracts and foreign currencies 77,288,533 (11,557,152)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (51,388,517) 66,632,928
==========================================================================================
Net increase in net assets resulting from operations 22,470,609 51,441,607
==========================================================================================
Share transactions-net:
Class A 13,695,433 24,813,254
------------------------------------------------------------------------------------------
Class B (5,379,322) (2,160,788)
------------------------------------------------------------------------------------------
Class C 5,098,681 594,530
------------------------------------------------------------------------------------------
Class R 300,240 1,830,726
------------------------------------------------------------------------------------------
Investor Class 386,521,009 173,236
------------------------------------------------------------------------------------------
Institutional Class 214,577 --
==========================================================================================
Net increase in net assets resulting from share
transactions 400,450,618 25,250,958
==========================================================================================
Net increase in net assets 422,921,227 76,692,565
==========================================================================================
NET ASSETS:
Beginning of period 322,636,921 245,944,356
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(3,462,276) and $(32,869) for 2004 and
2003, respectively) $745,558,148 $322,636,921
__________________________________________________________________________________________
==========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Large Cap 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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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
FS-413
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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.
FS-414
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. 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. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts.
I. 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 FEES PAID TO 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 $1 billion of the Fund's average daily net assets, plus 0.70% over $1 billion up to and including $2 billion of the Fund's average daily net assets and 0.625% of the Fund's average daily net assets in excess of $2 billion. 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 on investments by the Fund in such affiliated money market funds (excluding investments made in money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $1,700.
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 six months ended April 30, 2004, AIM was paid $107,299 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 six months ended April 30, 2004, AISI retained $567,763 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, Investor Class and 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, Class R and Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Class A, Class B, Class C and Class R 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to 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. The Fund, pursuant to the Investor Class Plan, pays AIM Distributors for its allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of the Investor Class shares. Pursuant to the Plans, for the six months ended April 30, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $296,031, $616,425, $248,316, $5,641 and $0, respectively. AIM has reimbursed $823,437 of Investor Class expenses related to an overpayment of Rule 12b-1 fees of the INVESCO Growth Fund paid to IDI, the Fund's former distributor in prior years.
FS-415
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $46,814 in front-end sales commissions from the sale of Class A shares and $453, $1,044, $1,881 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--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ 5,325,601 $ 77,171,085 $ (75,397,808) $ -- $ 7,098,878 $45,023
--------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional Class 5,325,601 77,171,085 (75,397,808) -- 7,098,878 44,622
==========================================================================================================================
Subtotal $10,651,202 $154,342,170 $(150,795,616) $ -- $14,197,756 $89,645
==========================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ --
--------------------------------------------
STIC Prime
Portfolio-Institutional Class --
============================================
Subtotal $ --
============================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME*
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ 5,969,563 $184,390,297 $(176,990,922) $ -- $13,368,938 $19,525
==========================================================================================================================
Total $16,620,765 $338,732,467 $(327,786,538) $ -- $27,566,694 $109,170
__________________________________________________________________________________________________________________________
==========================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------------------------
Liquid Assets
Portfolio-Institutional Class $ --
============================================
Total $ --
____________________________________________
============================================
|
* Dividend income is net of fees paid to security lending counterparties of $102,435.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $5,786 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $5,786.
FS-416
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $2,941 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $12,274,868 were on loan to brokers. The loans were secured by cash collateral of $13,368,938 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $19,525 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------
October 31, 2007 $ 380,100
---------------------------------------------------------
October 31, 2008 27,182,658
---------------------------------------------------------
October 31, 2009 267,323,492
---------------------------------------------------------
October 31, 2010 94,116,910
---------------------------------------------------------
October 31, 2011 11,281,239
=========================================================
Total capital loss carryforward $400,284,399
_________________________________________________________
=========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-417
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 six months ended April 30, 2004 was $422,132,003 and $480,391,342, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $111,747,400 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (14,084,588) ============================================================================== Net unrealized appreciation of investment securities $ 97,662,812 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $660,834,939. |
NOTE 10--SHARE INFORMATION
The Fund currently offers six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, Investor Class shares and 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, Investor Class shares and 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
----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,081,322 $ 28,310,183 9,469,394 $ 73,883,856
----------------------------------------------------------------------------------------------------------------------
Class B 1,279,809 11,415,221 4,041,264 29,817,268
----------------------------------------------------------------------------------------------------------------------
Class C 1,235,691 11,017,384 2,208,427 16,412,874
----------------------------------------------------------------------------------------------------------------------
Class R 64,687 592,400 278,067 2,156,076
----------------------------------------------------------------------------------------------------------------------
Investor Class* 2,445,194 22,509,628 20,194 178,134
----------------------------------------------------------------------------------------------------------------------
Institutional Class** 23,502 214,577 -- --
======================================================================================================================
Issued in connection with acquisitions:***
Class A 445,760 3,960,921 -- --
----------------------------------------------------------------------------------------------------------------------
Class B 24,464 210,855 -- --
----------------------------------------------------------------------------------------------------------------------
Class C 426,258 3,668,554 -- --
----------------------------------------------------------------------------------------------------------------------
Investor Class* 50,546,207 449,143,077 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 267,881 2,488,751 325,063 2,536,902
----------------------------------------------------------------------------------------------------------------------
Class B (276,637) (2,488,751) (334,300) (2,536,902)
======================================================================================================================
Reacquired:
Class A (2,286,750) (21,064,422) (6,726,902) (51,607,504)
----------------------------------------------------------------------------------------------------------------------
Class B (1,632,666) (14,516,647) (3,989,440) (29,441,154)
----------------------------------------------------------------------------------------------------------------------
Class C (1,080,091) (9,587,257) (2,147,493) (15,818,344)
----------------------------------------------------------------------------------------------------------------------
Class R (31,898) (292,160) (39,568) (325,350)
----------------------------------------------------------------------------------------------------------------------
Investor Class* (9,332,093) (85,131,696) (564) (4,898)
======================================================================================================================
45,200,640 $400,450,618 3,104,142 $ 25,250,958
______________________________________________________________________________________________________________________
======================================================================================================================
|
* Investor Class shares commenced sales on September 30, 2003. ** Institutional Class shares commenced sales on April 30, 2004. *** As of the opening of business on November 03, 2003, The Fund acquired all of the net assets of INVESCO Growth Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on June 11, 2003 and INVESCO Growth Fund shareholders on October 21, 2003. The acquisition was accomplished by a tax-free exchange of 51,442,689 shares of the Fund for 234,385,533 shares of INVESCO Growth Fund outstanding as of the close of business October 31, 2003. INVESCO Growth Fund's net assets at that date of $456,983,407, including $93,333,500 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $322,706,968.
FS-418
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
---------------------------------------------------------------------------------------------
MARCH 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 8.88 $ 7.37 $ 8.82 $ 17.74 $ 11.29 $10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.08)(a) (0.09)(a) (0.08)(a) (0.15)(a) (0.04)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.30 1.59 (1.36) (8.84) 6.60 1.33
=================================================================================================================================
Total from investment
operations 0.25 1.51 (1.45) (8.92) 6.45 1.29
=================================================================================================================================
Net asset value, end of period $ 9.13 $ 8.88 $ 7.37 $ 8.82 $ 17.74 $11.29
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.82% 20.49% (16.44)% (50.28)% 57.13% 13.70%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $172,249 $154,052 $105,320 $138,269 $225,255 $7,785
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.58%(c) 1.82% 1.70% 1.57% 1.58% 1.53%(d)(e)
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (1.04)%(c) (1.01)% (1.01)% (0.72)% (0.82)% (0.59)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 90% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$170,089,943.
(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.
CLASS B
------------------------------------------------------------------------------------------
APRIL 5, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.61 $ 7.20 $ 8.67 $ 17.54 $ 11.25 $11.02
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a) (0.08)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.29 1.53 (1.33) (8.71) 6.56 0.31
=================================================================================================================================
Total from investment operations 0.22 1.41 (1.47) (8.87) 6.29 0.23
=================================================================================================================================
Net asset value, end of period $ 8.83 $ 8.61 $ 7.20 $ 8.67 $ 17.54 $11.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.56% 19.58% (16.96)% (50.57)% 55.91% 2.09%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $119,766 $122,011 $104,040 $144,747 $210,224 $5,183
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 2.23%(c) 2.47% 2.35% 2.23% 2.24% 2.23%(d)(e)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.69)%(c) (1.66)% (1.66)% (1.39)% (1.48)% (1.29)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 90% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$123,962,466.
(d) Annualized.
(e) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 4.33% (annualized).
(f) Not annualized for periods less than one year.
FS-419
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------------------------------
APRIL 5, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.21 $ 8.67 $ 17.55 $ 11.25 $11.02
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a) (0.08)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.29 1.53 (1.32) (8.72) 6.57 0.31
=================================================================================================================================
Total from investment operations 0.22 1.41 (1.46) (8.88) 6.30 0.23
=================================================================================================================================
Net asset value, end of period $ 8.84 $ 8.62 $ 7.21 $ 8.67 $ 17.55 $11.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.55% 19.56% (16.84)% (50.60)% 56.00% 2.09%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $50,534 $44,272 $36,575 $57,865 $79,392 $ 901
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.23%(c) 2.47% 2.35% 2.23% 2.24% 2.23%(d)(e)
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.69)%(c) (1.66)% (1.66)% (1.39)% (1.48)% (1.29)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 90% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$49,936,106.
(d) Annualized.
(e) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 4.33% (annualized).
(f) Not annualized for periods less than one year.
CLASS R
---------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.87 $ 7.37 $ 8.40
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.09)(a) (0.04)(a)
-----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.29 1.59 (0.99)
===========================================================================================================
Total from investment operations 0.24 1.50 (1.03)
===========================================================================================================
Net asset value, end of period $ 9.11 $ 8.87 $ 7.37
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) 2.71% 20.35% (12.26)%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,483 $2,127 $ 9
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets 1.73%(c) 1.97% 1.85%(d)
===========================================================================================================
Ratio of net investment income (loss) to average net assets (1.19)%(c) (1.16)% (1.16)%(d)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(e) 90% 123% 111%
___________________________________________________________________________________________________________
===========================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,268,987.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-420
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
-----------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2004 2003
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.88 $ 8.24
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.01)(a)
-------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.30 0.65
=================================================================================================
Total from investment operations 0.28 0.64
=================================================================================================
Net asset value, end of period $ 9.16 $ 8.88
_________________________________________________________________________________________________
=================================================================================================
Total return(b) 3.15% 7.77%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $400,311 $ 174
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.06%(c) 1.56%(d)
-------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 1.46%(c) 1.56%(d)
=================================================================================================
Ratio of net investment income (loss) to average net assets (0.52)%(c) (0.75)%(d)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(e) 90% 123%
_________________________________________________________________________________________________
=================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$417,993,172.
(d) Annualized.
(e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
----------------------
APRIL 30, 2004
(DATE SALES COMMENCED)
------------------------------------------------------------------------------------
Net asset value, beginning of period $9.13
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) --
------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) --
====================================================================================
Total from investment operations --
====================================================================================
Net asset value, end of period $9.13
____________________________________________________________________________________
====================================================================================
Total return --%
____________________________________________________________________________________
====================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 215
____________________________________________________________________________________
====================================================================================
Ratio of expenses to average net assets --%
====================================================================================
Ratio of net investment income to average net assets --%
____________________________________________________________________________________
====================================================================================
Portfolio turnover rate(a) 90%
____________________________________________________________________________________
====================================================================================
|
(a) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
FS-421
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $37,311 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
FS-422
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-423
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.94%
ADVERTISING-0.91%
Omnicom Group Inc. 26,000 $ 2,067,260
========================================================================
AEROSPACE & DEFENSE-1.01%
L-3 Communications Holdings, Inc. 37,000 2,284,380
========================================================================
AIRLINES-1.22%
AMR Corp.(a)(b) 110,000 1,248,500
------------------------------------------------------------------------
JetBlue Airways Corp.(a)(b) 55,000 1,522,400
========================================================================
2,770,900
========================================================================
APPAREL RETAIL-0.93%
Chico's FAS, Inc.(a) 30,000 1,221,900
------------------------------------------------------------------------
Hot Topic, Inc.(a) 40,000 890,400
========================================================================
2,112,300
========================================================================
APPLICATION SOFTWARE-2.46%
Citrix Systems, Inc.(a) 60,000 1,143,000
------------------------------------------------------------------------
Intuit Inc.(a) 30,000 1,274,100
------------------------------------------------------------------------
PeopleSoft, Inc.(a) 120,000 2,025,600
------------------------------------------------------------------------
Siebel Systems, Inc.(a) 110,000 1,130,800
========================================================================
5,573,500
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.80%
Franklin Resources, Inc. 22,000 1,206,260
------------------------------------------------------------------------
Investors Financial Services Corp.(b) 50,000 1,943,500
------------------------------------------------------------------------
Legg Mason, Inc. 10,000 920,600
========================================================================
4,070,360
========================================================================
AUTO PARTS & EQUIPMENT-0.53%
Autoliv, Inc. 28,000 1,190,840
========================================================================
BIOTECHNOLOGY-4.36%
Angiotech Pharmaceuticals, Inc. (Canada)(a) 70,000 1,459,500
------------------------------------------------------------------------
Biogen Idec Inc.(a) 24,000 1,416,000
------------------------------------------------------------------------
Cephalon, Inc.(a)(b) 33,000 1,878,030
------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 38,000 2,311,540
------------------------------------------------------------------------
Invitrogen Corp.(a) 25,000 1,805,750
------------------------------------------------------------------------
Neurocrine Biosciences, Inc.(a) 15,000 984,450
========================================================================
9,855,270
========================================================================
BROADCASTING & CABLE TV-2.65%
Citadel Broadcasting Co.(a) 75,000 1,301,250
------------------------------------------------------------------------
Radio One, Inc.-Class D(a) 30,000 568,800
------------------------------------------------------------------------
Univision Communications Inc.-Class A(a) 65,000 2,200,250
------------------------------------------------------------------------
Westwood One, Inc.(a) 65,000 1,920,100
========================================================================
5,990,400
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
BUILDING PRODUCTS-0.93%
Masco Corp. 75,000 $ 2,100,750
========================================================================
CASINOS & GAMING-1.37%
Alliance Gaming Corp.(a) 40,000 998,800
------------------------------------------------------------------------
International Game Technology 25,000 943,500
------------------------------------------------------------------------
Mandalay Resort Group 20,000 1,149,000
========================================================================
3,091,300
========================================================================
COMMUNICATIONS EQUIPMENT-7.62%
Avaya Inc.(a) 150,000 2,052,000
------------------------------------------------------------------------
Comverse Technology, Inc.(a) 100,000 1,636,000
------------------------------------------------------------------------
Emulex Corp.(a) 90,000 1,500,300
------------------------------------------------------------------------
Juniper Networks, Inc.(a) 55,000 1,203,400
------------------------------------------------------------------------
QLogic Corp.(a) 50,000 1,349,500
------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 36,000 3,123,360
------------------------------------------------------------------------
UTStarcom, Inc.(a)(b) 242,000 6,376,700
========================================================================
17,241,260
========================================================================
COMPUTER & ELECTRONICS RETAIL-0.84%
Best Buy Co., Inc. 35,000 1,898,750
========================================================================
CONSUMER FINANCE-0.41%
First Marblehead Corp. (The)(a) 31,000 919,460
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.18%
Affiliated Computer Services, Inc.-Class
A(a)(b) 40,000 1,940,000
------------------------------------------------------------------------
Alliance Data Systems Corp.(a) 30,000 1,043,100
------------------------------------------------------------------------
DST Systems, Inc.(a) 25,000 1,103,750
------------------------------------------------------------------------
Fiserv, Inc.(a) 85,000 3,107,600
========================================================================
7,194,450
========================================================================
DEPARTMENT STORES-1.85%
Kohl's Corp.(a) 100,000 4,179,000
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.65%
Career Education Corp.(a) 22,000 1,408,000
------------------------------------------------------------------------
Corporate Executive Board Co. (The) 18,000 929,700
------------------------------------------------------------------------
ITT Educational Services, Inc.(a) 52,000 2,097,160
------------------------------------------------------------------------
University of Phoenix Online(a)(b) 18,000 1,567,080
========================================================================
6,001,940
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.58%
Rockwell Automation, Inc. 40,000 1,307,600
========================================================================
|
FS-424
MARKET
SHARES VALUE
------------------------------------------------------------------------
ELECTRONIC EQUIPMENT MANUFACTURERS-1.60%
Agilent Technologies, Inc.(a) 90,000 $ 2,430,900
------------------------------------------------------------------------
AU Optronics Corp.-ADR (Taiwan)(b) 55,000 1,181,400
========================================================================
3,612,300
========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.47%
Celestica Inc. (Canada)(a) 60,000 1,054,800
========================================================================
EMPLOYMENT SERVICES-1.70%
Manpower Inc. 40,000 1,876,000
------------------------------------------------------------------------
Monster Worldwide Inc.(a) 45,000 1,152,450
------------------------------------------------------------------------
Robert Half International Inc. 30,000 818,100
========================================================================
3,846,550
========================================================================
GENERAL MERCHANDISE STORES-1.27%
99 Cents Only Stores(a) 70,000 1,383,200
------------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 55,000 1,482,250
========================================================================
2,865,450
========================================================================
HEALTH CARE DISTRIBUTORS-1.09%
McKesson Corp. 75,000 2,464,500
========================================================================
HEALTH CARE EQUIPMENT-1.37%
Biomet, Inc. 45,000 1,777,500
------------------------------------------------------------------------
STERIS Corp.(a) 60,000 1,329,600
========================================================================
3,107,100
========================================================================
HEALTH CARE FACILITIES-0.97%
Community Health Systems Inc.(a) 85,000 2,192,150
========================================================================
HEALTH CARE SERVICES-1.40%
Express Scripts, Inc.(a) 41,000 3,170,940
========================================================================
HEALTH CARE SUPPLIES-0.52%
Fisher Scientific International Inc.(a) 20,000 1,171,000
========================================================================
HOME ENTERTAINMENT SOFTWARE-0.51%
Take-Two Interactive Software, Inc.(a) 40,000 1,155,600
========================================================================
HOMEBUILDING-0.49%
Centex Corp. 23,000 1,102,850
========================================================================
INDUSTRIAL MACHINERY-1.02%
Danaher Corp. 25,000 2,313,000
========================================================================
INSURANCE BROKERS-1.04%
Willis Group Holdings Ltd. (Bermuda) 65,000 2,360,150
========================================================================
INTERNET RETAIL-0.91%
Netflix Inc.(a)(b) 81,000 2,048,490
========================================================================
INTERNET SOFTWARE & SERVICES-4.21%
SINA Corp. (Cayman Islands)(a) 104,000 2,964,000
------------------------------------------------------------------------
United Online, Inc.(a)(b) 395,000 6,557,000
========================================================================
9,521,000
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
IT CONSULTING & OTHER SERVICES-0.61%
Cognizant Technology Solutions Corp.(a) 32,000 $ 1,384,320
========================================================================
LEISURE PRODUCTS-2.16%
Brunswick Corp. 40,000 1,644,400
------------------------------------------------------------------------
Hasbro, Inc. 75,000 1,416,750
------------------------------------------------------------------------
Marvel Enterprises, Inc.(a)(b) 96,000 1,823,040
========================================================================
4,884,190
========================================================================
MANAGED HEALTH CARE-3.05%
Aetna Inc. 17,000 1,406,750
------------------------------------------------------------------------
Anthem, Inc.(a) 62,000 5,491,960
========================================================================
6,898,710
========================================================================
MOVIES & ENTERTAINMENT-0.66%
Pixar(a) 22,000 1,502,600
========================================================================
OFFICE SERVICES & SUPPLIES-0.57%
Avery Dennison Corp. 20,000 1,284,600
========================================================================
OIL & GAS DRILLING-0.63%
Pride International, Inc.(a) 85,000 1,433,950
========================================================================
OIL & GAS EQUIPMENT & SERVICES-0.32%
Varco International, Inc.(a) 35,000 724,150
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.27%
Devon Energy Corp. 20,000 1,224,000
------------------------------------------------------------------------
Ultra Petroleum Corp.(a) (Canada) 50,000 1,642,000
========================================================================
2,866,000
========================================================================
PHARMACEUTICALS-3.48%
Endo Pharmaceuticals Holdings Inc.(a) 45,000 1,074,150
------------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(a)(b) 65,000 2,675,400
------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 36,000 1,545,120
------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 25,000 1,081,250
------------------------------------------------------------------------
Valeant Pharmaceuticals International 65,000 1,501,500
========================================================================
7,877,420
========================================================================
PUBLISHING-1.17%
Getty Images, Inc.(a)(b) 35,000 1,911,000
------------------------------------------------------------------------
Scholastic Corp.(a) 26,000 737,360
========================================================================
2,648,360
========================================================================
REGIONAL BANKS-0.64%
Commerce Bancorp, Inc. 15,000 855,150
------------------------------------------------------------------------
UCBH Holdings, Inc. 16,000 592,320
========================================================================
1,447,470
========================================================================
REINSURANCE-0.94%
Everest Re Group, Ltd. (Bermuda) 25,000 2,129,500
========================================================================
RESTAURANTS-1.94%
Krispy Kreme Doughnuts, Inc.(a)(b) 85,000 2,763,350
------------------------------------------------------------------------
|
FS-425
MARKET
SHARES VALUE
------------------------------------------------------------------------
RESTAURANTS-(CONTINUED)
Panera Bread Co.-Class A(a)(b) 40,000 $ 1,634,800
========================================================================
4,398,150
========================================================================
SEMICONDUCTOR EQUIPMENT-2.95%
Amkor Technology, Inc.(a) 100,000 808,000
------------------------------------------------------------------------
ASML Holding N.V.-New York Shares
(Netherlands)(a) 75,000 1,166,250
------------------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 175,000 1,394,750
------------------------------------------------------------------------
Novellus Systems, Inc.(a) 65,000 1,882,400
------------------------------------------------------------------------
Teradyne, Inc.(a) 70,000 1,426,600
========================================================================
6,678,000
========================================================================
SEMICONDUCTORS-6.83%
AMIS Holdings, Inc.(a) 145,000 2,091,045
------------------------------------------------------------------------
Fairchild Semiconductor International,
Inc.(a) 70,000 1,362,900
------------------------------------------------------------------------
Intersil Corp.-Class A 50,000 987,500
------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 48,000 1,859,040
------------------------------------------------------------------------
National Semiconductor Corp.(a) 80,000 3,263,200
------------------------------------------------------------------------
NVIDIA Corp.(a) 40,000 821,600
------------------------------------------------------------------------
OmniVision Technologies, Inc.(a) 195,000 4,348,890
------------------------------------------------------------------------
On Semiconductor Corp.(a) 150,000 724,500
========================================================================
15,458,675
========================================================================
SPECIALIZED FINANCE-0.35%
Assured Guaranty Ltd. (Bermuda)(a) 45,000 796,500
========================================================================
SPECIALTY STORES-4.90%
Advance Auto Parts, Inc.(a) 35,000 1,510,250
------------------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 91,000 3,377,920
------------------------------------------------------------------------
Staples, Inc. 110,000 2,833,600
------------------------------------------------------------------------
Tiffany & Co. 36,000 1,404,000
------------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 60,000 1,948,800
========================================================================
11,074,570
========================================================================
SYSTEMS SOFTWARE-3.99%
Adobe Systems Inc. 30,000 1,240,200
------------------------------------------------------------------------
Computer Associates International, Inc. 90,000 2,412,900
------------------------------------------------------------------------
Network Associates, Inc.(a) 50,000 784,000
------------------------------------------------------------------------
Novell, Inc.(a) 125,000 1,205,000
------------------------------------------------------------------------
Red Hat, Inc.(a) 67,000 1,521,570
------------------------------------------------------------------------
VERITAS Software Corp.(a) 70,000 1,866,900
========================================================================
9,030,570
========================================================================
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
TECHNOLOGY DISTRIBUTORS-0.58%
CDW Corp. 21,000 $ 1,312,290
========================================================================
THRIFTS & MORTGAGE FINANCE-3.82%
Doral Financial Corp. (Puerto Rico) 62,000 2,032,980
------------------------------------------------------------------------
MGIC Investment Corp. 22,000 1,619,640
------------------------------------------------------------------------
New York Community Bancorp, Inc. 80,000 2,005,600
------------------------------------------------------------------------
PMI Group, Inc. (The) 30,000 1,290,900
------------------------------------------------------------------------
W Holding Co., Inc. (Puerto Rico) 100,000 1,704,000
========================================================================
8,653,120
========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.30%
MSC Industrial Direct Co., Inc.-Class A 24,000 687,840
========================================================================
TRUCKING-0.45%
Swift Transportation Co., Inc.(a) 60,000 1,015,200
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.46%
AO VimpelCom-ADR (Russia)(a) 15,000 1,346,400
------------------------------------------------------------------------
Nextel Partners, Inc.-Class A(a) 90,000 1,201,500
------------------------------------------------------------------------
NII Holdings Inc.-Class B(a) 86,000 3,010,000
========================================================================
5,557,900
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $207,047,660) 221,579,685
========================================================================
MONEY MARKET FUNDS-2.07%
Liquid Assets Portfolio-Institutional
Class(c) 2,341,725 2,341,725
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 2,341,725 2,341,725
========================================================================
Total Money Market Funds (Cost
$4,683,450) 4,683,450
========================================================================
TOTAL INVESTMENTS-100.01% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $211,731,110) 226,263,135
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-9.09%
Liquid Assets Portfolio-Institutional
Class(c)(d) 20,551,880 20,551,880
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $20,551,880) 20,551,880
------------------------------------------------------------------------
TOTAL INVESTMENTS-109.10% (Cost $232,282,990) 246,815,015
========================================================================
OTHER ASSETS LESS LIABILITIES-(9.10%) (20,582,507)
========================================================================
NET ASSETS-100.00% $226,232,508
________________________________________________________________________
========================================================================
|
Investment Abbreviation:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-426
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$207,047,660)* $ 221,579,685
------------------------------------------------------------
Investments in affiliated money market funds
(cost $25,235,330) 25,235,330
============================================================
Total investments (cost $232,282,990) 246,815,015
============================================================
Cash 277,289
------------------------------------------------------------
Receivables for:
Investments sold 9,829,839
------------------------------------------------------------
Fund shares sold 294,138
------------------------------------------------------------
Dividends 75,048
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 21,626
------------------------------------------------------------
Other assets 41,898
============================================================
Total assets 257,354,853
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 9,946,710
------------------------------------------------------------
Fund shares reacquired 274,999
------------------------------------------------------------
Deferred compensation and retirement plans 25,288
------------------------------------------------------------
Collateral upon return of securities loaned 20,551,880
------------------------------------------------------------
Accrued distribution fees 129,820
------------------------------------------------------------
Accrued trustees' fees 907
------------------------------------------------------------
Accrued transfer agent fees 126,406
------------------------------------------------------------
Accrued operating expenses 66,335
============================================================
Total liabilities 31,122,345
============================================================
Net assets applicable to shares outstanding $ 226,232,508
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 337,902,793
------------------------------------------------------------
Undistributed net investment income (loss) (1,985,675)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (124,216,635)
------------------------------------------------------------
Unrealized appreciation of investment
securities 14,532,025
============================================================
$ 226,232,508
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 115,778,210
____________________________________________________________
============================================================
Class B $ 79,598,960
____________________________________________________________
============================================================
Class C $ 30,166,341
____________________________________________________________
============================================================
Class R $ 678,997
____________________________________________________________
============================================================
Institutional Class $ 10,000
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 12,557,998
____________________________________________________________
============================================================
Class B 8,911,411
____________________________________________________________
============================================================
Class C 3,376,340
____________________________________________________________
============================================================
Class R 73,973
____________________________________________________________
============================================================
Institutional Class 1,085
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.22
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.22 divided by
94.50%) $ 9.76
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.93
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.93
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.18
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.22
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $20,090,421
were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-427
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,333) $ 393,487
--------------------------------------------------------------------------
Dividends from affiliated money market funds* 60,361
==========================================================================
Total investment income 453,848
==========================================================================
EXPENSES:
Advisory fees 954,204
--------------------------------------------------------------------------
Administrative services fees 42,351
--------------------------------------------------------------------------
Custodian fees 32,856
--------------------------------------------------------------------------
Distribution fees:
Class A 209,389
--------------------------------------------------------------------------
Class B 433,951
--------------------------------------------------------------------------
Class C 158,430
--------------------------------------------------------------------------
Class R 1,060
--------------------------------------------------------------------------
Transfer agent fees--Class A, B, C and R 464,514
--------------------------------------------------------------------------
Trustees' fees 7,369
--------------------------------------------------------------------------
Other 114,265
==========================================================================
Total expenses 2,418,389
==========================================================================
Less: Fees waived and expense offset arrangements (3,477)
==========================================================================
Net expenses 2,414,912
==========================================================================
Net investment income (loss) (1,961,064)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 24,079,955
==========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (15,104,741)
==========================================================================
Net gain from investment securities 8,975,214
==========================================================================
Net increase in net assets resulting from operations $ 7,014,150
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security leading counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-428
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,961,064) $ (2,955,493)
------------------------------------------------------------------------------------------
Net realized gain from investment securities 24,079,955 14,307,340
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (15,104,741) 42,907,455
==========================================================================================
Net increase in net assets resulting from operations 7,014,150 54,259,302
==========================================================================================
Share transactions-net:
Class A 3,734,239 18,339,848
------------------------------------------------------------------------------------------
Class B (4,277,405) 1,788,121
------------------------------------------------------------------------------------------
Class C 394,932 5,771,210
------------------------------------------------------------------------------------------
Class R 471,267 197,900
------------------------------------------------------------------------------------------
Institutional Class 10,000 --
==========================================================================================
Net increase in net assets resulting from share
transactions 333,033 26,097,079
==========================================================================================
Net increase in net assets 7,347,183 80,356,381
==========================================================================================
NET ASSETS:
Beginning of period 218,885,325 138,528,944
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(1,985,675) and $(24,611) for 2004 and
2003, respectively) $226,232,508 $218,885,325
__________________________________________________________________________________________
==========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap 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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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
FS-429
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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 FEES PAID TO 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 $1 billion of the Fund's average daily net assets plus 0.75% of the Fund's average daily net assets in excess of $1 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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $1,278.
FS-430
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
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 six months ended April 30, 2004, AIM was paid $42,351 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 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 six months ended April 30, 2004, AISI retained $226,682 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 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $209,389, $433,951, $158,430 and $1,060, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $54,172 in front-end sales commissions from the sale of Class A shares and $83, $1,981, $1,598 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--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 6,039,656 $32,318,082 $(36,016,013) $ -- $2,341,725 $22,674 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 6,039,656 32,318,082 (36,016,013) -- 2,341,725 22,207 --
====================================================================================================================================
Subtotal $12,079,312 $64,636,164 $(72,032,026) $ -- $4,683,450 $44,881 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
MARKET PROCEEDS UNREALIZED MARKET REALIZED
VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND GAIN
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME* (LOSS)
----------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 1,593,500 $ 58,068,480 $ (39,110,100) $ -- $20,551,880 $15,480 $--
----------------------------------------------------------------------------------------------------------------------------
Total $13,672,812 $122,704,644 $(111,142,126) $ -- $25,235,330 $60,361 $--
____________________________________________________________________________________________________________________________
============================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $54,174.
FS-431
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $1,848 and reductions in custodian fees of $351 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $2,199.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $2,631 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $20,090,421 were on loan to brokers. The loans were secured by cash collateral of $20,551,880 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $15,480 for securities lending transactions.
FS-432
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and retained as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------
October 31, 2008 $ 9,284,312
---------------------------------------------------------
October 31, 2009 86,724,292
---------------------------------------------------------
October 31, 2010 50,812,218
=========================================================
Total capital loss carryforward $146,820,822
_________________________________________________________
=========================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
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 six months ended April 30, 2004 was $221,959,788 and $218,783,557, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 25,575,956
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (11,698,167)
===========================================================
Net unrealized appreciation of investment
securities $ 13,877,789
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $232,937,226.
|
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 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 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
----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,249,753 $ 21,467,845 7,664,279 $ 58,252,871
----------------------------------------------------------------------------------------------------------------------
Class B 1,176,506 10,876,147 3,281,689 24,068,217
----------------------------------------------------------------------------------------------------------------------
Class C 789,319 7,279,174 1,644,878 12,124,964
----------------------------------------------------------------------------------------------------------------------
Class R 49,726 479,803 25,518 209,495
----------------------------------------------------------------------------------------------------------------------
Institutional Class* 1,085 10,000 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 163,303 1,581,746 189,563 1,431,485
----------------------------------------------------------------------------------------------------------------------
Class B (168,347) (1,581,746) (194,530) (1,431,485)
======================================================================================================================
Reacquired:
Class A (2,005,324) (19,315,352) (5,404,259) (41,344,508)
----------------------------------------------------------------------------------------------------------------------
Class B (1,468,162) (13,571,806) (2,879,424) (20,848,611)
----------------------------------------------------------------------------------------------------------------------
Class C (747,169) (6,884,242) (872,689) (6,353,754)
----------------------------------------------------------------------------------------------------------------------
Class R (930) (8,536) (1,487) (11,595)
----------------------------------------------------------------------------------------------------------------------
Institutional Class* -- -- -- --
======================================================================================================================
39,760 $ 333,033 3,453,538 $ 26,097,079
______________________________________________________________________________________________________________________
======================================================================================================================
|
* Institutional Class shares commenced sales on April 30, 2004.
FS-433
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------------------------
NOVEMBER 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------ OCTOBER 31,
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.92 $ 6.54 $ 8.58 $ 14.38 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.11)(a) (0.13)(a) (0.11)(a) (0.12)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.36 2.49 (1.91) (5.69) 4.50
=================================================================================================================================
Total from investment operations 0.30 2.38 (2.04) (5.80) 4.38
=================================================================================================================================
Net asset value, end of period $ 9.22 $ 8.92 $ 6.54 $ 8.58 $ 14.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 3.36% 36.39% (23.78)% (40.33)% 43.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $115,778 $108,436 $63,463 $94,457 $114,913
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.70%(c) 1.90% 1.83% 1.65% 1.63%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.32)%(c) (1.42)% (1.49)% (1.06)% (0.76)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 96% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$120,308,471.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-434
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
---------------------------------------------------------------------------
NOVEMBER 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.68 $ 6.40 $ 8.45 $ 14.25 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.34 2.43 (1.87) (5.62) 4.47
=================================================================================================================================
Total from investment operations 0.25 2.28 (2.05) (5.80) 4.25
=================================================================================================================================
Net asset value, end of period $ 8.93 $ 8.68 $ 6.40 $ 8.45 $ 14.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.88% 35.63% (24.26)% (40.70)% 42.50%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $79,599 $81,298 $58,654 $81,905 $103,893
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.35%(c) 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.97)%(c) (2.07)% (2.14)% (1.73)% (1.45)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 96% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$87,267,121.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-435
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
---------------------------------------------------------------------------
NOVEMBER 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.68 $ 6.40 $ 8.45 $ 14.26 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.34 2.43 (1.87) (5.63) 4.48
=================================================================================================================================
Total from investment operations 0.25 2.28 (2.05) (5.81) 4.26
=================================================================================================================================
Net asset value, end of period $ 8.93 $ 8.68 $ 6.40 $ 8.45 $ 14.26
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.88% 35.63% (24.26)% (40.74)% 42.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,166 $28,928 $16,404 $23,971 $29,969
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.35%(c) 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.97)%(c) (2.07)% (2.14)% (1.73)% (1.45)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 96% 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 and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$31,859,973.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-436
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
------------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.89 $ 6.54 $ 8.73
--------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.13)(a) (0.05)(a)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.36 2.48 (2.14)
==============================================================================================================
Total from investment operations 0.29 2.35 (2.19)
==============================================================================================================
Net asset value, end of period $ 9.18 $ 8.89 $ 6.54
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 3.26% 35.93% (25.09)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 679 $ 224 $ 7
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets 1.85%(c) 2.05% 1.98%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (1.47)%(c) (1.57)% (1.64)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 96% 211% 185%
______________________________________________________________________________________________________________
==============================================================================================================
|
()(a)Calculated using average shares outstanding.
()(b)Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Is not annualized for periods less than one
year.
()(c)Ratios are annualized and based on average daily net assets of $426,198.
()(d)Annualized.
()(e)Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $9.22
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) --
===================================================================================
Net asset value, end of period $9.22
___________________________________________________________________________________
===================================================================================
Total return --
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets --
___________________________________________________________________________________
===================================================================================
Ratio of net investment income to average net assets --
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(a) 96%
___________________________________________________________________________________
===================================================================================
|
()(a)Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of
FS-437
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $21,126 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission;
FS-438
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; declaration that the advisory agreement is unenforceable or void; refund of advisory fees; interest; and attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-439
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------
COMMON STOCKS-98.79%
ADVERTISING-1.36%
Omnicom Group Inc. 200 $ 15,902
==================================================================
AIR FREIGHT & LOGISTICS-0.99%
FedEx Corp. 160 11,506
==================================================================
AIRLINES-1.33%
Southwest Airlines Co. 1,090 15,565
==================================================================
APPAREL RETAIL-1.00%
Hot Topic, Inc.(a) 250 5,565
------------------------------------------------------------------
Ross Stores, Inc. 200 6,100
==================================================================
11,665
==================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.36%
Northern Trust Corp. 100 4,228
==================================================================
COMMUNICATIONS EQUIPMENT-1.44%
Cisco Systems, Inc.(a) 803 16,759
==================================================================
COMPUTER HARDWARE-1.25%
Dell Inc.(a) 420 14,578
==================================================================
CONSUMER FINANCE-1.63%
MBNA Corp. 780 19,016
==================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.21%
Affiliated Computer Services, Inc.-Class A(a) 670 32,495
------------------------------------------------------------------
Paychex, Inc. 210 7,829
------------------------------------------------------------------
SunGard Data Systems Inc.(a) 340 8,864
==================================================================
49,188
==================================================================
DEPARTMENT STORES-2.40%
Kohl's Corp.(a) 671 28,041
==================================================================
DIVERSIFIED BANKS-1.02%
Wells Fargo & Co. 210 11,857
==================================================================
DIVERSIFIED CAPITAL MARKETS-1.48%
J.P. Morgan Chase & Co. 460 17,296
==================================================================
DIVERSIFIED CHEMICALS-0.88%
E. I. du Pont de Nemours & Co. 240 10,308
==================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.08%
Cintas Corp. 280 12,589
==================================================================
|
FS-440
MARKET
SHARES VALUE
------------------------------------------------------------------
DRUG RETAIL-1.83%
Walgreen Co. 620 $ 21,378
==================================================================
ELECTRIC UTILITIES-1.42%
FPL Group, Inc. 260 16,541
==================================================================
GENERAL MERCHANDISE STORES-0.85%
Dollar Tree Stores, Inc.(a) 370 9,971
==================================================================
HEALTH CARE DISTRIBUTORS-2.04%
Cardinal Health, Inc. 325 23,806
==================================================================
HEALTH CARE EQUIPMENT-1.49%
Biomet, Inc. 120 4,740
------------------------------------------------------------------
Medtronic, Inc. 250 12,615
==================================================================
17,355
==================================================================
HEALTH CARE FACILITIES-0.56%
HCA Inc. 160 6,501
==================================================================
HEALTH CARE SERVICES-1.72%
Express Scripts, Inc.(a) 260 20,108
==================================================================
HOME IMPROVEMENT RETAIL-0.89%
Lowe's Cos., Inc. 200 10,412
==================================================================
HOUSEHOLD PRODUCTS-3.28%
Colgate-Palmolive Co. 460 26,625
------------------------------------------------------------------
Procter & Gamble Co. (The) 110 11,632
==================================================================
38,257
==================================================================
HYPERMARKETS & SUPER CENTERS-2.29%
Wal-Mart Stores, Inc. 470 26,790
==================================================================
INDUSTRIAL CONGLOMERATES-3.80%
General Electric Co. 1,480 44,326
==================================================================
INDUSTRIAL GASES-0.64%
Air Products & Chemicals, Inc. 150 7,471
==================================================================
INDUSTRIAL MACHINERY-1.74%
Danaher Corp. 80 7,402
------------------------------------------------------------------
Illinois Tool Works Inc. 150 12,931
==================================================================
20,333
==================================================================
INSURANCE BROKERS-1.20%
Marsh & McLennan Cos., Inc. 310 13,981
==================================================================
INTEGRATED OIL & GAS-4.12%
ChevronTexaco Corp. 130 11,895
------------------------------------------------------------------
Exxon Mobil Corp. 850 36,168
==================================================================
48,063
==================================================================
|
FS-441
MARKET
SHARES VALUE
------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES-3.70%
SBC Communications Inc. 1,020 $ 25,398
------------------------------------------------------------------
Verizon Communications Inc. 470 17,738
==================================================================
43,136
==================================================================
INVESTMENT BANKING & BROKERAGE-0.97%
Morgan Stanley 220 11,306
==================================================================
MANAGED HEALTH CARE-0.95%
UnitedHealth Group Inc. 180 11,066
==================================================================
MOTORCYCLE MANUFACTURERS-1.35%
Harley-Davidson, Inc. 280 15,770
==================================================================
MOVIES & ENTERTAINMENT-1.22%
Viacom Inc.-Class B 190 7,344
------------------------------------------------------------------
Walt Disney Co. (The) 300 6,909
==================================================================
14,253
==================================================================
MULTI-LINE INSURANCE-2.95%
American International Group, Inc. 480 34,392
==================================================================
OIL & GAS EQUIPMENT & SERVICES-0.45%
Weatherford International Ltd. (Bermuda)(a) 120 5,218
==================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.08%
Apache Corp. 300 12,561
==================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.21%
Citigroup Inc. 780 37,510
==================================================================
PERSONAL PRODUCTS-1.12%
Gillette Co. (The) 320 13,094
==================================================================
PHARMACEUTICALS-7.27%
Johnson & Johnson 600 32,418
------------------------------------------------------------------
Merck & Co. Inc. 150 7,050
------------------------------------------------------------------
Pfizer Inc. 1,270 45,415
==================================================================
84,883
==================================================================
PROPERTY & CASUALTY INSURANCE-1.95%
Ambac Financial Group, Inc. 150 10,350
------------------------------------------------------------------
Berkshire Hathaway Inc.-Class B(a) 4 12,476
==================================================================
22,826
==================================================================
REGIONAL BANKS-3.24%
Fifth Third Bancorp 300 $ 16,098
------------------------------------------------------------------
Synovus Financial Corp. 910 21,722
==================================================================
37,820
==================================================================
SEMICONDUCTOR EQUIPMENT-0.99%
Novellus Systems, Inc.(a) 400 11,584
==================================================================
|
FS-442
MARKET
SHARES VALUE
------------------------------------------------------------------
SEMICONDUCTORS-5.35%
Analog Devices, Inc. 150 $ 6,390
------------------------------------------------------------------
Intel Corp. 1,300 33,449
------------------------------------------------------------------
Microchip Technology Inc. 200 5,604
------------------------------------------------------------------
Texas Instruments Inc. 220 5,522
------------------------------------------------------------------
Xilinx, Inc.(a) 340 11,434
==================================================================
62,399
==================================================================
SOFT DRINKS-1.73%
Coca-Cola Co. (The) 400 20,228
==================================================================
SPECIALTY STORES-3.23%
Bed Bath & Beyond Inc.(a) 1,015 37,677
==================================================================
SYSTEMS SOFTWARE-5.80%
Microsoft Corp. 1,130 29,346
------------------------------------------------------------------
Oracle Corp.(a) 1,500 16,830
------------------------------------------------------------------
VERITAS Software Corp.(a) 805 21,469
==================================================================
67,645
==================================================================
THRIFTS & MORTGAGE FINANCE-3.60%
Fannie Mae 440 30,237
------------------------------------------------------------------
Washington Mutual, Inc. 300 11,817
==================================================================
42,054
==================================================================
TRADING COMPANIES & DISTRIBUTORS-0.33%
Fastenal Co. 70 3,841
==================================================================
Total Common Stocks (Cost $1,074,191) 1,153,054
==================================================================
TOTAL INVESTMENTS--98.79% (Cost $1,074,191) 1,153,054
==================================================================
OTHER ASSETS LESS LIABILITIES--1.21% 14,093
==================================================================
NET ASSETS-100.00% $1,167,147
==================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
See accompanying notes which are an integral part of the financial statements.
FS-443
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost $1,074,191) $1,153,054
-----------------------------------------------------------
Cash 14,577
-----------------------------------------------------------
Receivables for:
Investments sold 57,274
-----------------------------------------------------------
Dividends 1,581
-----------------------------------------------------------
Amount due from advisor 13,000
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 4,264
-----------------------------------------------------------
Other assets 88
===========================================================
Total assets 1,243,838
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 59,214
-----------------------------------------------------------
Deferred compensation and retirement plans 4,264
-----------------------------------------------------------
Accrued trustees' fees 995
-----------------------------------------------------------
Accrued transfer agent fees 12
-----------------------------------------------------------
Accrued operating expenses 12,206
===========================================================
Total liabilities 76,691
===========================================================
Net assets applicable to shares outstanding $1,167,147
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,023,064
-----------------------------------------------------------
Undistributed net investment income (loss) (5,575)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 70,795
-----------------------------------------------------------
Unrealized appreciation of investment
securities 78,863
===========================================================
$1,167,147
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 466,857
___________________________________________________________
===========================================================
Class B $ 350,145
___________________________________________________________
===========================================================
Class C $ 350,145
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 41,241
___________________________________________________________
===========================================================
Class B 30,930
___________________________________________________________
===========================================================
Class C 30,930
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.32
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.32 / 94.50%) $ 11.98
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 11.32
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 11.32
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-444
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends $ 8,294
______________________________________________________________________
======================================================================
EXPENSES:
Advisory fees 4,352
----------------------------------------------------------------------
Administrative services fees 24,863
----------------------------------------------------------------------
Custodian fees 1,319
----------------------------------------------------------------------
Distribution fees:
Class A 807
----------------------------------------------------------------------
Class B 1,727
----------------------------------------------------------------------
Class C 1,727
----------------------------------------------------------------------
Transfer agent fees 50
----------------------------------------------------------------------
Trustees' fees 6,109
----------------------------------------------------------------------
Professional fees 11,621
----------------------------------------------------------------------
Other 411
======================================================================
Total expenses 52,986
======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (42,913)
======================================================================
Net expenses 10,073
======================================================================
Net investment income (loss) (1,779)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 70,987
======================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (4,566)
----------------------------------------------------------------------
Net gain from investment securities 66,421
----------------------------------------------------------------------
Net increase in net assets resulting from operations $ 64,642
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-445
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
---------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,779) $ (2,460)
---------------------------------------------------------------------------------------
Net realized gain from investment securities 70,987 33,177
---------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (4,566) 95,453
---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 64,642 126,170
---------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (1,512) (2,800)
_______________________________________________________________________________________
=======================================================================================
Class B (1,133) (2,100)
_______________________________________________________________________________________
=======================================================================================
Class C (1,133) (2,100)
=======================================================================================
Total distributions from net investment income (3,778) (7,000)
---------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (8,824) --
_______________________________________________________________________________________
=======================================================================================
Class B (6,619) --
_______________________________________________________________________________________
=======================================================================================
Class C (6,619) --
=======================================================================================
Total distributions from net realized gains (22,062) --
---------------------------------------------------------------------------------------
Decrease in net assets resulting from distributions (25,840) (7,000)
---------------------------------------------------------------------------------------
Share transactions-net:
Class A 10,336 2,800
_______________________________________________________________________________________
=======================================================================================
Class B 7,752 2,100
_______________________________________________________________________________________
=======================================================================================
Class C 7,752 2,100
=======================================================================================
Net increase in net assets resulting from share
transactions 25,840 7,000
=======================================================================================
Net increase in net assets 64,642 126,170
---------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,102,505 976,335
=======================================================================================
End of period (including undistributed net investment income
(loss) of $(5,575) and $(18) for 2004 and 2003,
respectively) $1,167,147 $1,102,505
_______________________________________________________________________________________
=======================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-446
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM U.S. 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 authorized to issue an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. 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 is currently not open to investors.
The Fund's investment objective is to provide long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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
FS-447
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.
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.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO 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 $1 billion of the Fund's average daily net assets, plus 0.70% of the next $1 billion of the Fund's average daily net assets, plus 0.65% of the Fund's average daily net assets in excess of $2 billion. The Fund's advisor has voluntarily agreed to waive advisory fees or reimburse expenses of Class A, Class B and Class C shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) to 1.75%. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the 1.75% cap: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), as defined in the Financial Accounting Standard's Board's Generally Accepted Accounting Principles or as approved by the Fund's board of trustees; (v) expenses related to a merger or reorganization, as approved by the Fund's board of trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the only expense offset arrangements from which the Fund benefits are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. During periods of fee waivers or reimbursements to the extent the annualized expense ratio does not exceed the limit for the period committed, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the six months ended April 30, 2004, AIM waived fees of $4,352 and reimbursed expenses of $34,141.
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 six months ended April 30, 2004, AIM was paid $24,863 for such services.
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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. During the six months ended April 30, 2004, AISI retained $21 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C 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 and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to 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 amount of sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. AIM Distributors has voluntarily agreed to waive all fees during the time the shares are not available for sale. Waivers may be modified or discontinued at any time. For the six months ended April 30, 2004, AIM Distributors waived all plan fees of $807, $1,727 and $1,727 for the Class A, Class B and Class C shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $7 and reductions in custodian fees of $152 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $159.
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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $2,274 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
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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.
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NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
NOTE 7--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 six months ended April 30, 2004 was $437,482 and $412,200, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
------------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $101,788
------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (23,111)
============================================================
Net unrealized appreciation of
investment securities $ 78,677
____________________________________________________________
============================================================
Cost of investments for tax purposes is
$1,074,377.
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NOTE 8--SHARE INFORMATION
The Fund currently consists of three different classes of shares that are not available for sale: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A 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
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2004 2003
----------------- ----------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A* 946 $10,336 294 $2,800
------------------------------------------------------------
Class B* 708 7,752 221 2,100
------------------------------------------------------------
Class C* 708 7,752 221 2,100
============================================================
2,362 $25,840 736 $7,000
____________________________________________________________
============================================================
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* Currently, the Fund is not open to investors. All shares are owned by AIM.
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NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------
AUGUST 30, 2002
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.94 $ 9.76 $10.00
--------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.02) (0.00)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.66 1.27 (0.24)
==============================================================================================================
Total from investment operations 0.64 1.25 (0.24)
==============================================================================================================
Less distributions:
Dividends from net investment income (0.04) (0.07) --
--------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.22) -- --
==============================================================================================================
Total distributions (0.26) (0.07) --
==============================================================================================================
Net asset value, end of period $11.32 $10.94 $ 9.76
______________________________________________________________________________________________________________
==============================================================================================================
Total return(a) 5.90% 12.92% (2.40)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 467 $ 441 $ 391
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.84% 1.76%(c)
--------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 8.81%(b) 11.21% 22.45%(c)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(b) (0.25)% (0.22)%(c)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(d) 37% 39% 1%
______________________________________________________________________________________________________________
==============================================================================================================
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(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $463,186.
(c) Annualized.
(d) Not annualized for periods less than one year.
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NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------
AUGUST 30, 2002
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.94 $ 9.76 $10.00
--------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.02) (0.00)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.66 1.27 (0.24)
==============================================================================================================
Total from investment operations 0.64 1.25 (0.24)
==============================================================================================================
Less distributions:
Dividends from net investment income (0.04) (0.07) --
--------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.22) -- --
==============================================================================================================
Total distributions (0.26) (0.07) --
==============================================================================================================
Net asset value, end of period $11.32 $10.94 $ 9.76
______________________________________________________________________________________________________________
==============================================================================================================
Total return(a) 5.90% 12.92% (2.40)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 350 $ 331 $ 293
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.84% 1.76%(c)
--------------------------------------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 9.46%(b) 11.86% 23.10%(c)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(b) (0.25)% (0.22)%(c)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(d) 37% 39% 1%
______________________________________________________________________________________________________________
==============================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $347,393.
(c) Annualized.
(d) Not annualized for periods less than one year.
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NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------
AUGUST 30,
2002
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.94 $ 9.76 $10.00
--------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.02) (0.00)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.66 1.27 (0.24)
==============================================================================================================
Total from investment operations 0.64 1.25 (0.24)
==============================================================================================================
Less distributions:
Dividends from net investment income (0.04) (0.07) --
--------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.22) -- --
==============================================================================================================
Total distributions (0.26) (0.07) --
==============================================================================================================
Net asset value, end of period $11.32 $10.94 $ 9.76
______________________________________________________________________________________________________________
==============================================================================================================
Total return(a) 5.90% 12.92% (2.40)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 350 $ 331 $ 293
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 1.78%(b) 1.84% 1.76%(c)
==============================================================================================================
Without fee waivers and expense reimbursements 9.46%(b) 11.86% 23.10%(c)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(b) (0.25)% (0.22)%(c)
==============================================================================================================
Portfolio turnover rate(d) 37% 39% 1%
______________________________________________________________________________________________________________
==============================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $347,393.
(c) Annualized.
(d) Not annualized for periods less than one year.
NOTE 10--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
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REGULATORY ACTIONS AND INQUIRIES CONCERNING IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
REGULATORY INQUIRIES CONCERNING AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
RESPONSE OF AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most
FS-454
effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,262 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
PRIVATE ACTIONS ALLEGING MARKET TIMING
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
OTHER PRIVATE ACTIONS
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
FS-455
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-456
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.98%
ADVERTISING-0.91%
Omnicom Group Inc. 300,000 $ 23,853,000
==========================================================================
APPAREL RETAIL-1.69%
Gap, Inc. (The) 2,000,000 44,020,000
==========================================================================
APPLICATION SOFTWARE-0.61%
Siebel Systems, Inc.(a) 1,550,000 15,934,000
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.05%
Franklin Resources, Inc. 500,000 27,415,000
==========================================================================
BIOTECHNOLOGY-2.91%
Biogen Idec Inc.(a) 350,000 20,650,000
--------------------------------------------------------------------------
Genentech, Inc.(a)(b) 450,000 55,260,000
==========================================================================
75,910,000
==========================================================================
CASINOS & GAMING-1.52%
International Game Technology 1,050,000 39,627,000
==========================================================================
COMMUNICATIONS EQUIPMENT-9.65%
Avaya Inc.(a) 1,850,000 25,308,000
--------------------------------------------------------------------------
Cisco Systems, Inc.(a) 4,250,000 88,697,500
--------------------------------------------------------------------------
Corning Inc.(a) 1,350,000 14,890,500
--------------------------------------------------------------------------
Juniper Networks, Inc.(a) 1,000,000 21,880,000
--------------------------------------------------------------------------
Motorola, Inc. 2,150,000 39,237,500
--------------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,500,000 21,015,000
--------------------------------------------------------------------------
Nortel Networks Corp. (Canada)(a) 4,000,000 14,960,000
--------------------------------------------------------------------------
Research In Motion Ltd. (Canada) 300,000 26,028,000
==========================================================================
252,016,500
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.83%
Best Buy Co., Inc. 400,000 21,700,000
==========================================================================
COMPUTER HARDWARE-2.13%
Dell Inc.(a) 1,600,000 55,536,000
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.75%
EMC Corp.(a) 1,750,000 19,530,000
==========================================================================
CONSUMER ELECTRONICS-1.03%
Sony Corp.-ADR (Japan) 700,000 26,880,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
CONSUMER FINANCE-3.29%
American Express Co. 750,000 $ 36,712,500
--------------------------------------------------------------------------
MBNA Corp. 1,150,000 28,037,000
--------------------------------------------------------------------------
SLM Corp. 550,000 21,070,500
==========================================================================
85,820,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.87%
First Data Corp. 500,000 22,695,000
==========================================================================
DEPARTMENT STORES-2.35%
Kohl's Corp.(a) 1,000,000 41,790,000
--------------------------------------------------------------------------
Nordstrom, Inc. 550,000 19,596,500
==========================================================================
61,386,500
==========================================================================
DIVERSIFIED CAPITAL MARKETS-1.08%
J.P. Morgan Chase & Co. 750,000 28,200,000
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.13%
Apollo Group, Inc.-Class A(a) 300,000 27,264,000
--------------------------------------------------------------------------
Cendant Corp.(b) 2,300,000 54,464,000
==========================================================================
81,728,000
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.88%
Rockwell Automation, Inc. 700,000 22,883,000
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.40%
Agilent Technologies, Inc.(a) 1,350,000 36,463,500
==========================================================================
FOOTWEAR-0.90%
NIKE, Inc.-Class B 325,000 23,383,750
==========================================================================
GENERAL MERCHANDISE STORES-1.00%
Target Corp. 600,000 26,022,000
==========================================================================
HEALTH CARE EQUIPMENT-5.12%
Bard (C.R.), Inc. 125,000 13,283,750
--------------------------------------------------------------------------
Boston Scientific Corp.(a) 1,000,000 41,190,000
--------------------------------------------------------------------------
Guidant Corp. 750,000 47,257,500
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 400,000 31,940,000
==========================================================================
133,671,250
==========================================================================
HEALTH CARE SERVICES-1.10%
Caremark Rx, Inc.(a) 850,000 28,772,500
==========================================================================
HEALTH CARE SUPPLIES-1.14%
Alcon, Inc. (Switzerland) 400,000 29,700,000
==========================================================================
|
FS-457
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOME ENTERTAINMENT SOFTWARE-0.77%
Electronic Arts Inc.(a) 400,000 $ 20,248,000
==========================================================================
HOME IMPROVEMENT RETAIL-1.55%
Home Depot, Inc. (The) 1,150,000 40,468,500
==========================================================================
HOTELS, RESORTS & CRUISE LINES-0.76%
Starwood Hotels & Resorts Worldwide, Inc. 500,000 19,895,000
==========================================================================
HOUSEHOLD PRODUCTS-1.62%
Procter & Gamble Co. (The) 400,000 42,300,000
==========================================================================
HOUSEWARES & SPECIALTIES-1.02%
Fortune Brands, Inc. 350,000 26,687,500
==========================================================================
INDUSTRIAL CONGLOMERATES-4.87%
3M Co. 200,000 17,296,000
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 4,000,000 109,800,000
==========================================================================
127,096,000
==========================================================================
INDUSTRIAL MACHINERY-1.93%
Danaher Corp. 300,000 27,756,000
--------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 350,000 22,592,500
==========================================================================
50,348,500
==========================================================================
INTERNET RETAIL-1.57%
Amazon.com, Inc.(a) 300,000 13,038,000
--------------------------------------------------------------------------
eBay Inc.(a) 350,000 27,937,000
==========================================================================
40,975,000
==========================================================================
INTERNET SOFTWARE & SERVICES-1.74%
Yahoo! Inc.(a)(b) 900,000 45,414,000
==========================================================================
INVESTMENT BANKING & BROKERAGE-4.30%
Goldman Sachs Group, Inc. (The) 500,000 48,375,000
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 500,000 36,700,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 500,000 27,115,000
==========================================================================
112,190,000
==========================================================================
MANAGED HEALTH CARE-3.31%
Aetna Inc. 600,000 49,650,000
--------------------------------------------------------------------------
UnitedHealth Group Inc. 600,000 36,888,000
==========================================================================
86,538,000
==========================================================================
MOVIES & ENTERTAINMENT-0.75%
Walt Disney Co. (The) 850,000 19,575,500
==========================================================================
MULTI-LINE INSURANCE-1.10%
American International Group, Inc. 400,000 28,660,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-2.49%
Citigroup Inc. 1,350,000 $ 64,921,500
==========================================================================
PERSONAL PRODUCTS-2.06%
Avon Products, Inc. 300,000 25,200,000
--------------------------------------------------------------------------
Gillette Co. (The) 700,000 28,644,000
==========================================================================
53,844,000
==========================================================================
PHARMACEUTICALS-7.45%
Forest Laboratories, Inc.(a) 250,000 16,120,000
--------------------------------------------------------------------------
Johnson & Johnson 400,000 21,612,000
--------------------------------------------------------------------------
Lilly (Eli) & Co. 400,000 29,524,000
--------------------------------------------------------------------------
Pfizer Inc. 1,250,000 44,700,000
--------------------------------------------------------------------------
Sepracor Inc.(a)(b) 550,000 26,295,500
--------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 450,000 27,702,000
--------------------------------------------------------------------------
Wyeth 750,000 28,552,500
==========================================================================
194,506,000
==========================================================================
RESTAURANTS-1.79%
McDonald's Corp. 1,000,000 27,230,000
--------------------------------------------------------------------------
Yum! Brands, Inc.(a) 500,000 19,395,000
==========================================================================
46,625,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-0.72%
Novellus Systems, Inc.(a) 650,000 18,824,000
==========================================================================
SEMICONDUCTORS-6.29%
Analog Devices, Inc. 1,200,000 51,120,000
--------------------------------------------------------------------------
Intel Corp. 500,000 12,865,000
--------------------------------------------------------------------------
Linear Technology Corp. 350,000 12,470,500
--------------------------------------------------------------------------
Maxim Integrated Products, Inc. 500,000 22,995,000
--------------------------------------------------------------------------
Microchip Technology Inc. 1,500,000 42,030,000
--------------------------------------------------------------------------
Texas Instruments Inc. 900,000 22,590,000
==========================================================================
164,070,500
==========================================================================
SOFT DRINKS-0.94%
PepsiCo, Inc. 450,000 24,520,500
==========================================================================
SPECIALTY STORES-1.23%
Bed Bath & Beyond Inc.(a) 500,000 18,560,000
--------------------------------------------------------------------------
Tiffany & Co. 350,000 13,650,000
==========================================================================
32,210,000
==========================================================================
SYSTEMS SOFTWARE-5.66%
Computer Associates International, Inc. 1,250,000 33,512,500
--------------------------------------------------------------------------
Microsoft Corp. 2,000,000 51,940,000
--------------------------------------------------------------------------
Oracle Corp.(a) 1,600,000 17,952,000
--------------------------------------------------------------------------
Symantec Corp.(a)(b) 450,000 20,272,500
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 900,000 24,003,000
==========================================================================
147,680,000
==========================================================================
|
FS-458
MARKET
SHARES VALUE
--------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-0.72%
New York Community Bancorp, Inc. 750,000 $ 18,802,500
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,090,183,803) 2,609,547,000
==========================================================================
MONEY MARKET FUNDS-0.89%
Liquid Assets Portfolio-Institutional
Class(c) 11,577,097 11,577,097
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 11,577,097 11,577,097
==========================================================================
Total Money Market Funds (Cost
$23,154,194) 23,154,194
==========================================================================
TOTAL INVESTMENTS-100.87%
(excluding investments purchased with cash
collateral from securities loaned) (Cost
$2,113,337,997) 2,632,701,194
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-2.21%
Liquid Assets Portfolio-Institutional
Class(c)(d) 57,768,875 $ 57,768,875
==========================================================================
Total Money Market Funds (purchased with cash
collateral from securities loaned) (Cost
$57,768,875) 57,768,875
==========================================================================
TOTAL INVESTMENTS-103.08% (Cost
$2,171,106,872) 2,690,470,069
==========================================================================
OTHER ASSETS LESS LIABILITIES-(3.08%) (80,428,845)
==========================================================================
NET ASSETS-100.00% $2,610,041,224
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-459
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$2,090,183,803)* $ 2,609,547,000
------------------------------------------------------------
Investments in affiliated money market
funds (cost $80,923,069) 80,923,069
============================================================
Total investments (cost $2,171,106,872) 2,690,470,069
============================================================
Foreign currencies, at value (cost $361) 380
------------------------------------------------------------
Cash 4,814,353
------------------------------------------------------------
Receivables for:
Investments sold 22,312,717
------------------------------------------------------------
Fund shares sold 503,446
------------------------------------------------------------
Dividends 1,660,362
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 259,814
------------------------------------------------------------
Other assets 127,803
============================================================
Total assets 2,720,148,944
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 44,736,666
------------------------------------------------------------
Fund shares reacquired 3,985,481
------------------------------------------------------------
Deferred compensation and retirement
plans 513,523
------------------------------------------------------------
Collateral upon return of securities
loaned 57,768,875
------------------------------------------------------------
Accrued distribution fees 1,016,269
------------------------------------------------------------
Accrued trustees' fees 3,163
------------------------------------------------------------
Accrued transfer agent fees 1,726,059
------------------------------------------------------------
Accrued operating expenses 357,684
============================================================
Total liabilities 110,107,720
============================================================
Net assets applicable to shares outstanding $ 2,610,041,224
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 5,520,244,653
------------------------------------------------------------
Undistributed net investment income (loss) (11,266,634)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (3,418,300,011)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 519,363,216
============================================================
$ 2,610,041,224
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 2,016,085,520
____________________________________________________________
============================================================
Class B $ 504,191,444
____________________________________________________________
============================================================
Class C $ 86,754,896
____________________________________________________________
============================================================
Class R $ 1,197,513
____________________________________________________________
============================================================
Institutional Class $ 1,811,851
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 169,387,964
____________________________________________________________
============================================================
Class B 45,988,114
____________________________________________________________
============================================================
Class C 7,905,783
____________________________________________________________
============================================================
Class R 101,081
____________________________________________________________
============================================================
Institutional Class 144,126
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 11.90
------------------------------------------------------------
Offering price per share:
(Net asset value of $11.90 divided
by 94.50%) $ 12.59
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.96
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.97
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 11.85
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.57
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $53,690,701 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-460
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $148,377) $10,123,351
-------------------------------------------------------------------------
Dividends from affiliated money market funds* 209,628
-------------------------------------------------------------------------
Interest 1,093
=========================================================================
Total investment income 10,334,072
=========================================================================
EXPENSES:
Advisory fees 8,979,009
-------------------------------------------------------------------------
Administrative services fees 275,943
-------------------------------------------------------------------------
Custodian fees 126,100
-------------------------------------------------------------------------
Distribution fees:
Class A 3,218,267
-------------------------------------------------------------------------
Class B 2,757,897
-------------------------------------------------------------------------
Class C 459,093
-------------------------------------------------------------------------
Class R 1,895
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 4,504,324
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 278
-------------------------------------------------------------------------
Trustees' fees 24,239
-------------------------------------------------------------------------
Other 816,392
=========================================================================
Total expenses 21,163,437
=========================================================================
Less: Fees waived and expense offset arrangements (25,506)
=========================================================================
Net expenses 21,137,931
=========================================================================
Net investment income (loss) (10,803,859)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from investment securities 157,363,463
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (67,131,913)
-------------------------------------------------------------------------
Foreign currencies 12
=========================================================================
(67,131,901)
=========================================================================
Net gain from investment securities and foreign currencies 90,231,562
=========================================================================
Net increase in net assets resulting from operations $79,427,703
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-461
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (10,803,859) $ (22,244,366)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 157,363,463 (152,819,227)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts (67,131,901) 703,701,978
==============================================================================================
Net increase in net assets resulting from operations 79,427,703 528,638,385
==============================================================================================
Share transactions-net:
Class A (206,709,341) (354,029,189)
----------------------------------------------------------------------------------------------
Class B (66,664,856) (78,758,321)
----------------------------------------------------------------------------------------------
Class C (6,891,987) (11,803,823)
----------------------------------------------------------------------------------------------
Class R 905,606 190,176
----------------------------------------------------------------------------------------------
Institutional Class (476,329) (83,682)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (279,836,907) (444,484,839)
==============================================================================================
Net increase (decrease) in net assets (200,409,204) 84,153,546
==============================================================================================
NET ASSETS:
Beginning of period 2,810,450,428 2,726,296,882
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(11,266,634) and $(462,775) for 2004
and 2003, respectively) $2,610,041,224 $2,810,450,428
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-462
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
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 authorized to issue 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 of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 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.
FS-463
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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.
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, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) 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 FEES PAID TO 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 on investments by the Fund in such affiliated money market funds
FS-464
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
(excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $4,333. 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 six months ended April 30, 2004, AIM was paid $275,943 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 six months ended April 30, 2004, AISI retained $2,217,146 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 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to selected dealers and financial institutions who furnish continuing personal shareholder services to 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 six months ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $3,218,267, $2,757,897, $459,093 and $1,895, 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 six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $158,273 in front-end sales commissions from the sale of Class A shares and $1,552, $7,564, $3,762 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, AIM Capital, AISI and/or AIM Distributors.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS FROM APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $36,428,079 $204,541,772 $(229,392,754) $ -- $11,577,097 $ 74,574 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 36,428,079 204,541,772 (229,392,754) -- 11,577,097 72,243 --
====================================================================================================================================
Subtotal $72,856,158 $409,083,544 $(458,785,508) $ -- $23,154,194 $146,817 $ --
====================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS FROM APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 38,996,800 $359,375,081 $(340,603,006) $ -- $57,768,875 $ 62,811 $ --
====================================================================================================================================
Total $111,852,958 $768,458,625 $(799,388,514) $ -- $80,923,069 $209,628 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $301,483.
FS-465
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $21,173 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $21,173.
NOTE 5--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 and INVESCO 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. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $7,092 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 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO 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.
The Fund is a participant in an uncommitted unsecured revolving 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 credit facility 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 six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily 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 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to 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 received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $53,690,701 were on loan to brokers. The loans were secured by cash collateral of $57,768,875 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $62,811 for securities lending transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
FS-466
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 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
______________________________________________________________________________
==============================================================================
|
* Any capital loss carryforward listed is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
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 six months ended April 30, 2004 was $1,050,926,636 and $1,243,658,936, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $538,813,330 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (58,240,361) ============================================================================== Net unrealized appreciation of investment securities $480,572,969 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $2,209,897,100. |
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 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 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
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,756,900 $ 45,855,282 10,192,956 $ 102,256,843
--------------------------------------------------------------------------------------------------------------------------
Class B 1,729,871 19,437,131 5,051,931 47,044,808
--------------------------------------------------------------------------------------------------------------------------
Class C 634,548 7,141,131 1,715,252 15,941,057
--------------------------------------------------------------------------------------------------------------------------
Class R 92,769 1,134,058 23,136 234,973
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 8,265 107,206 16,638 177,847
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,349,730 28,916,839 1,369,192 14,331,798
--------------------------------------------------------------------------------------------------------------------------
Class B (2,547,150) (28,916,839) (1,477,850) (14,331,798)
==========================================================================================================================
Reacquired:
Class A (23,196,433) (281,481,462) (47,251,093) (470,617,830)
--------------------------------------------------------------------------------------------------------------------------
Class B (5,083,204) (57,185,148) (12,154,199) (111,471,331)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,247,449) (14,033,118) (2,990,841) (27,744,880)
--------------------------------------------------------------------------------------------------------------------------
Class R (18,615) (228,452) (4,184) (44,797)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (45,454) (583,535) (25,361) (261,529)
==========================================================================================================================
(23,566,222) $(279,836,907) (45,534,423) $(444,484,839)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
FS-467
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31 $ 21.72
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.07) (0.07)(a) (0.10) (0.14)(a) (0.10)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.35 2.19 (3.11) (11.87) 3.18 8.16
=================================================================================================================================
Total from investment operations 0.31 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 $ 11.90 $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.67% 22.39% (25.14)% (47.38)% 10.61% 38.62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,016,086 $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 1.36%(c) 1.47% 1.33% 1.21% 1.03% 1.03%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.36%(c) 1.47% 1.33% 1.22% 1.07% 1.08%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (0.62)%(c) (0.68)% (0.64)% (0.56)% (0.45)% (0.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 38% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,157,299,504.
(d) Not annualized for periods less than one year.
FS-468
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29 $ 21.12
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.14) (0.15)(a) (0.21) (0.36)(a) (0.30)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.33 2.03 (2.89) (11.21) 3.08 7.93
=============================================================================================================================
Total from investment operations 0.25 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 $ 10.96 $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 2.33% 21.43% (25.63)% (47.75)% 9.76% 37.59%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $504,191 $555,779 $533,224 $922,476 $1,927,514 $1,291,456
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.06%(c) 2.17% 2.04% 1.92% 1.78% 1.82%
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.06%(c) 2.17% 2.04% 1.93% 1.82% 1.87%
=============================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.32)%(c) (1.38)% (1.34)% (1.27)% (1.20)% (1.17)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate(d) 38% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$554,610,131.
(d) Not annualized for periods less than one year.
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------
2004 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30 $ 21.14
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.14) (0.15)(a) (0.21) (0.36)(a) (0.30)(a)
-----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.33 2.03 (2.89) (11.23) 3.10 7.92
=======================================================================================================================
Total from investment operations 0.25 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 $ 10.97 $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 2.33% 21.40% (25.61)% (47.77)% 9.83% 37.50%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $86,755 $91,325 $86,455 $150,604 $301,590 $105,420
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.06%(c) 2.17% 2.04% 1.92% 1.78% 1.82%
-----------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.06%(c) 2.17% 2.04% 1.93% 1.82% 1.87%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.32)%(c) (1.38)% (1.34)% (1.27)% (1.20)% (1.17)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(d) 38% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$92,323,016.
(d) Not annualized for periods less than one year.
FS-469
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
---------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2004 2003 2002
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.56 $ 9.47 $ 11.36
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.06) (0.03)(a)
-----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.32 2.15 (1.86)
===========================================================================================================
Total from investment operations 0.29 2.09 (1.89)
===========================================================================================================
Net asset value, end of period $11.85 $11.56 $ 9.47
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) 2.51% 22.07% (16.64)%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,198 $ 311 $ 76
===========================================================================================================
Ratio of expenses to average net assets 1.56%(c) 1.67% 1.53%(d)
===========================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.88)% (0.84)%(d)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(e) 38% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $762,302.
(d) Annualized.
(e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.20 $ 9.91 $ 13.16 $29.00 $ 28.96 $ 22.18
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00) 0.00 (0.01)(a) (0.01) (0.06)(a) 0.02
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.37 2.29 (3.24) (12.29) 3.29 8.32
=================================================================================================================================
Total from investment operations 0.37 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 $12.57 $12.20 $ 9.91 $13.16 $ 29.00 $ 28.96
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 3.03% 23.11% (24.70)% (47.11)% 11.07% 39.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,812 $2,213 $ 1,883 $7,667 $18,634 $114,076
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.76%(c) 0.78% 0.82% 0.69% 0.64% 0.63%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 0.76%(c) 0.78% 0.82% 0.70% 0.68% 0.68%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.02)%(c) 0.01% (0.12)% (0.04)% (0.04)% 0.02%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 38% 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 as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,075,038.
(d) Not annualized for periods less than one year.
FS-470
NOTE 12--LEGAL PROCEEDINGS
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. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
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 IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG 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 and Colorado complaints made substantially similar allegations. 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 State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $100,517 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment
FS-471
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These 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; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO 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 are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-472
PART C
OTHER INFORMATION
Item 22. 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)
- (g) Amendment No. 6, dated September 14, 2004, to the Amended and Restated
Agreement and Declaration of Trust of Registrant, dated May 15, 2002.(26)
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)
(3) - Second Amendment adopted effective September 15, 2004, to the Amended and
Restated By-Laws of Registrant, adopted effective May 15, 2002.(26)
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)
|
Item 22. Exhibits
- (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)
- (e) Amendment No. 4, dated July 1, 2004, to Master Investment Advisory Agreement, dated June 21,
2000, between Registrant and A I M Advisors, Inc.(26)
- (f) Amendment No. 5, dated September 15, 2004, to Master Investment Advisory Agreement, dated
June 21, 2000, between Registrant and A I M Advisors, Inc.(26)
(2) - Master Sub-Advisory Agreement, dated June 21, 2000, between A I M Advisors, Inc. and A I M Capital
Management, Inc.(13)
(3) - Sub-Advisory Agreement, dated June 21, 2000, between A I M Advisors, Inc. and H.S. Dent Advisors,
Inc.(13)
e (1) - (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)
- (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) Amendment No. 6 to the Amended and Restated Master Distribution Agreement, dated as of
January 6, 2004, between Registrant (all classes of shares except Class B Shares) and A I M
Distributors, Inc.(26)
- (h) Amendment No. 7 to the Amended and Restated Master Distribution Agreement dated as of March
31, 2004, between Registrant (all classes of shares except Class B Shares) and A I M
Distributors, Inc.(26)
- (i) Amendment No. 8 to the Amended and Restated Master Distribution Agreement, dated as of
April 30, 2004, between Registrant (all classes of shares except Class B Shares) and A I M
Distributors, Inc.(26)
|
Item 22. Exhibits
- (j) Amendment No. 9 to the Amended and Restated Master Distribution Agreement, dated as of
September 14, 2004, between Registrant (all classes of shares except Class B Shares) and A I M
Distributors, Inc.(26)
- (k) Amendment No. 10 to the Amended and Restated Master Distribution Agreement, dated
as of September 15, 2004, between Registrant (all classes of shares except Class B Shares)
and A I M Distributors, Inc.(26)
- (l) Form of Amendment No. 11 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.(26)
(2) - (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)
- (i) Amendment No. 8 to the Amended and Restated Master Distribution Agreement, dated as of March
31, 2004, between Registrant (Class B Shares) and A I M Distributors, Inc.(26)
- (j) Amendment No. 9 to the Amended and Restated Master Distribution Agreement, dated as of April
30, 2004, between Registrant (Class B Shares) and A I M Distributors, Inc.(26)
- (k) Amendment No. 10 to the Amended and Restated Master Distribution Agreement, dated as of
September 15, 2004, between Registrant (Class B Shares) and A I M Distributors, Inc.(26)
|
Item 22. Exhibits
(3) - Form of Selected Dealer Agreement between A I M Distributors, Inc. and selected dealers.(14)
(4) - 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) - Transfer Agency and Service Agreement, dated July 1, 2004, between Registrant and AIM Investment
Services, Inc.(26)
(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)
|
Item 22. Exhibits
(3) - Amended and Restated Master Administrative Services Agreement, dated July 1, 2004, between
Registrant and A I M Advisors, Inc.(26)
(4) - (a) Memorandum of Agreement, regarding securities lending, dated October 29, 2003, between
Registrant, on behalf of all Funds, and A I M Advisors, Inc.(26)
- (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.(26)
j - Consent of Ernst & Young LLP.(26)
k - Omitted Financial Statements - None.
l (1) - Agreement Concerning Initial Capitalization of Registrant's AIM Large Cap Growth Fund, dated
February 26, 1999.(7)
(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) - (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)
|
Item 22. Exhibits
- (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)
- (g) Amendment No. 6, dated March 31, 2004, to the Amended and Restated Master
Distribution Plan between Registrant (Class A Shares) and A I M Distributors,
Inc.(26)
- (h) Amendment No. 7, dated April 30, 2004, to the Amended and Restated Master
Distribution Plan between Registrant (Class A Shares) and A I M Distributors,
Inc.(26)
(2) - (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)
- (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)
- (g) Amendment No. 6, dated March 31, 2004, to the Amended and Restated Master
Distribution Plan between Registrant (Class B Shares) and A I M Distributors,
Inc.(26)
- (h) Amendment No. 7, dated April 30, 2004, to the Amended and Restated Master
Distribution Plan between Registrant (Class B Shares) and A I M Distributors,
Inc.(26)
|
Item 22. Exhibits
(3) - (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)
- (g) Amendment No. 6, dated March 31, 2004, to the Amended and Restated Master Distribution Plan
between Registrant (Class C Shares) and A I M Distributors, Inc.(26)
- (h) Amendment No. 7, dated April 30, 2004, to the Amended and Restated Master Distribution Plan
between Registrant (Class C Shares) and A I M Distributors, Inc.(26)
(4) - (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)
- (e) Amendment No. 4, dated April 30, 2004, to the Amended and Restated Master Distribution Plan
between Registrant (Class R Shares) and A I M Distributors, Inc.(26)
(5) - (a) Amended and Restated Master Distribution Plan (Compensation) between Registrant (Investor
Class Shares) and A I M Distributors, Inc., effective July 1, 2004.(26)
|
Item 22. Exhibits
- (b) Form of Amendment No. 1, dated ___________, 2004, to the Amended and Restated
Master Distribution Plan (Compensation) between Registrant (Investor Class Shares)
and A I M Distributors, Inc., effective July 1, 2004.(26)
(6) - _____ Amended and Restated Master Distribution Plan (Reimbursement) between
Registrant (Investor Class Shares) and A I M Distributors, Inc., effective July 1,
2004.(26)
(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
(Compensation) (Investor Class Shares).(26)
(11) - Form of Master Related Agreement to Amended and Restated Master Distribution Plan
(Reimbursement) (Investor Class Shares).(26)
n - Fifth Amended and Restated Multiple Class Plan of The AIM Family of Funds(R),
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 and as further
amended and restated May 12, 2004.(26)
o - 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)
q - 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 trustees and officers of the Registrant have been filed with the Securities and
Exchange Commission as exhibits with the Registration Statement of AIM Variable
Insurance Funds on Form N-14 on September 24, 2004 and hereby are incorporated by
reference.
|
(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) Incorporated herein by reference to PEA No. 79, filed on March 1, 2004.
(26) Filed herewith electronically
Item 23. Persons Controlled by or Under Common Control With the Fund
None.
Item 24. 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 $55,000,000 limit of liability (an additional $10,000,000 coverage applies to independent directors/trustees only).
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 25. Business and Other Connections of Investment Advisor
The only employment of a substantial nature of AIM's directors and officers is with AIM 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.
Item 26. 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 Treasurer's Series Trust (with respect to INVESCO U.S.
Government Money Fund)
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
Glenda A. Dayton Senior Vice President None
Ivy B. McLemore Senior Vice President None
David J. Nardecchia Senior Vice President None
Margaret A. Vinson Senior Vice President None
Gary K. Wendler Senior Vice President None
Stephen H. Bitteker First Vice President None
|
Name and Principal Position and Offices with Positions and Offices
Business Address* Underwriter with Registrant
------------------- ------------------------------------- -------------------------
Kevin M. Carome Vice President Senior Vice President,
Secretary and Chief Legal
Officer
Mary A. Corcoran Vice President None
Rhonda Dixon-Gunner Vice President None
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
Norman W. Woodson Vice President None
Rebecca Starling-Klatt Chief Compliance Officer & Assistant Vice None
President
Kathleen J. Pflueger Secretary Assistant Secretary
|
(c) None.
Item 27. 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 28. Management Services
None.
Item 29. 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 29th day of September, 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 09/29/04
---------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ Bob R. Baker* Trustee 09/29/04
----------------------------
(Bob R. Baker)
/s/ Frank S. Bayley* Trustee 09/29/04
----------------------------
(Frank S. Bayley)
/s/ James T. Bunch* Trustee 09/29/04
----------------------------
(James T. Bunch)
/s/ Bruce L. Crockett* Trustee 09/29/04
----------------------------
(Bruce L. Crockett)
/s/ Albert R. Dowden* Trustee 09/29/04
----------------------------
(Albert R. Dowden)
/s/ Edward K. Dunn, Jr.* Trustee 09/29/04
----------------------------
(Edward K. Dunn, Jr.)
/s/ Jack M. Fields* Trustee 09/29/04
----------------------------
(Jack M. Fields)
/s/ Carl Frischling* Trustee 09/29/04
----------------------------
(Carl Frischling)
/s/ Gerald J. Lewis* Trustee 09/29/04
----------------------------
(Gerald J. Lewis)
/s/ Prema Mathai-Davis* Trustee 09/29/04
----------------------------
(Prema Mathai-Davis)
/s/ Lewis F. Pennock* Trustee 09/29/04
----------------------------
(Lewis F. Pennock)
/s/ Ruth H. Quigley* Trustee 09/29/04
----------------------------
(Ruth H. Quigley)
|
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Louis S. Sklar* Trustee 09/29/04
----------------------------
(Louis S. Sklar)
/s/ Larry Soll* Trustee 09/29/04
----------------------------
(Larry Soll)
/s/ Mark H. Williamson* Trustee & 09/29/04
---------------------------- Executive Vice President
(Mark H. Williamson)
/s/ Sidney M. Dilgren Vice President & Treasurer 09/29/04
---------------------------- (Principal Financial and
(Sidney M. Dilgren) Accounting Officer)
*By /s/ Robert H. Graham 09/29/04
----------------------------
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 have been filed with the Securities and Exchange Commission as exhibits with the Registration Statement of AIM Variable Insurance Funds on Form N-14 on September 24, 2004.
INDEX
Exhibit Number Description
a(1)(g) Amendment No. 6, dated September 14, 2004, to the Amended and Restated Agreement and
Declaration of Trust of Registrant, dated May 15, 2002
b(3) Second Amendment adopted effective September 15, 2004, to the Amended and Restated By-Laws of
Registrant, adopted effective May 15, 2002
d(1)(e) Amendment No. 4, dated July 1, 2004, to Master Investment Advisory Agreement, dated
June 21, 2000, between Registrant and A I M Advisors, Inc.
d(1)(f) Amendment No. 5, dated September 15, 2004, to Master Investment Advisory Agreement,
dated June 21, 2000, between Registrant and A I M Advisors, Inc.
e(1)(g) Amendment No. 6 to the Amended and Restated Master Distribution Agreement, dated as of
January 6, 2004, between Registrant (all classes of shares except Class B shares) and
A I M Distributors, Inc.
e(1)(h) Amendment No. 7 to the Amended and Restated Master Distribution Agreement, dated as of March
31, 2004, between Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.
e(1)(i) Amendment No. 8 to the Amended and Restated Master Distribution Agreement, dated as of
April 30, 2004, between Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.
e(1)(j) Amendment No. 9 to the Amended and Restated Master Distribution Agreement, dated as of
September 14, 2004, between Registrant (all classes of shares except Class B shares)
and A I M Distributors, Inc.
e(1)(k) Amendment No. 10 to the Amended and Restated Master Distribution Agreement, dated as of
September 15, 2004, between Registrant (all classes of shares except Class B shares)
and A I M Distributors, Inc.
e(1)(l) Form of Amendment No. 11 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.
e(2)(i) Amendment No. 8 to the Amended and Restated Master Distribution Agreement, dated as of
March 31, 2004, between Registrant (Class B shares) and A I M Distributors, Inc.
e(2)(j) Amendment No. 9 to the Amended and Restated Master Distribution Agreement, dated as of
April 30, 2004, between Registrant (Class B shares) and A I M Distributors, Inc.
e(2)(k) Amendment No. 10 to the Amended and Restated Master Distribution Agreement, dated as of
September 15, 2004, between Registrant (Class B shares) and A I M Distributors, Inc.
h(1) Transfer Agency and Service Agreement, dated July 1, 2004, between Registrant and AIM
Investment Services, Inc.
h(3) Amended and Restated Master Administrative Services Agreement, dated July 1, 2004,
between Registrant and A I M Advisors, Inc.
h(4)(a) Memorandum of Agreement, regarding securities lending, dated October 29, 2003, between
Registrant, on behalf of all Funds, and A I M Advisors, Inc.
|
Exhibit Number Description
i Opinion and consent of Ballard Spahr Andrews & Ingersoll LLP
j Consent of Ernst & Young LLP
m(1)(g) Amendment No. 6, dated March 31, 2004, to the Amended and Restated Master Distribution
Plan between Registrant (Class A Shares) and A I M Distributors, Inc.
m(1)(h) Amendment No. 7, dated April 30, 2004, to the Amended and Restated Master Distribution
Plan between Registrant (Class A Shares) and A I M Distributors, Inc.
m(2)(g) Amendment No. 6, dated March 31, 2004, to the Amended and Restated Master Distribution
Plan between Registrant (Class B Shares) and A I M Distributors, Inc.
m(2)(h) Amendment No. 7, dated April 30, 2004, to the Amended and Restated Master Distribution
Plan between Registrant (Class B Shares) and A I M Distributors, Inc.
m(3)(g) Amendment No. 6, dated March 31, 2004, to the Amended and Restated Master Distribution
Plan between Registrant (Class C Shares) and A I M Distributors, Inc.
m(3)(h) Amendment No. 7, dated April 30, 2004, to the Amended and Restated Master Distribution
Plan between Registrant (Class C Shares) and A I M Distributors, Inc.
m(4)(e) Amendment No. 4, dated April 30, 2004, to the Amended and Restated Master Distribution
Plan between Registrant (Class R Shares) and A I M Distributors, Inc.
m(5)(a) Amended and Restated Master Distribution Plan (Compensation) between Registrant
(Investor Class Shares) and A I M Distributors, Inc., effective July 1, 2004
m(5)(b) Form of Amendment No. 1, dated ___________, 2004, to the Amended and Restated Master
Distribution Plan (Compensation) between Registrant (Investor Class Shares) and A I M
Distributors, Inc., effective July 1, 2004
m(6) Amended and Restated Master Distribution Plan (Reimbursement) between Registrant
(Investor Class Shares) and A I M Distributors, Inc., effective July 1, 2004
m(10) Form of Master Related Agreement to Amended and Restated Master Distribution Plan
(Compensation) (Investor Class Shares)
m(11) Form of Master Related Agreement to Amended and Restated Master Distribution Plan
(Reimbursement) (Investor Class Shares)
n(1) Fifth 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 and as further amended and restated effective May 12, 2004
|
AMENDMENT NO. 6
TO AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST OF
AIM EQUITY FUNDS
This Amendment No. 6 to the Amended and Restated Agreement and Declaration of Trust of AIM Equity Funds (this "Amendment") amends, effective as of September 14, 2004, the Amended and Restated Agreement and Declaration of Trust of AIM Equity Funds (the "Trust") dated as of May 15, 2002, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby amended and restated to read in its entirety as set forth on Exhibit 1 to this Amendment.
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of September 14, 2004.
By: /s/ Robert H. Graham
----------------------
Name: Robert H. Graham
Title: President
|
EXHIBIT 1 TO AMENDMENT NO. 6
TO
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF AIM EQUITY FUNDS
"SCHEDULE A
AIM EQUITY FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM Aggressive Growth Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Blue Chip Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
Investor Class Shares
AIM Capital Development Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
Investor Class Shares
AIM Charter Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Constellation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Core Strategies Fund Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
|
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM Dent Demographic Trends Fund Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
AIM Diversified Dividend Fund Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
AIM Emerging Growth Fund Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
AIM Large Cap Basic Value Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
Investor Class Shares
AIM Large Cap Growth Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
Investor Class Shares
AIM Mid Cap Growth Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Select Basic Value Fund Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
AIM U.S. Growth Fund Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
AIM Weingarten Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares"
|
SECOND AMENDMENT TO
AMENDED AND RESTATED BYLAWS
OF AIM EQUITY FUNDS
Adopted effective September 15, 2004
The Amended and Restated Bylaws of AIM Equity Funds (the "Trust"), adopted effective May 15, 2002, (the "Bylaws"), are hereby amended as follows:
1. A new Section 7 is hereby added to Article II, such new Section 7 to read in its entirety as follows:
"Section 7. Chair; Vice Chair. The Board of Trustees shall have a Chair, who shall be a Trustee who is not an "interested person," as such term is defined in the 1940 Act. The Chair shall be elected by a majority of the Trustees, including a majority of the Trustees who are not "interested persons," as such term is defined in the 1940 Act. The Board of Trustees may also have a Vice Chair, who shall be a Trustee. The Vice Chair shall be elected by a majority of the Trustees, including a majority of the Trustees who are not "interested persons," as such term is defined in the 1940 Act. The Chair shall preside at all meetings of the Shareholders and the Board of Trustees, if the Chair is present, and shall approve the agendas of all meetings of the Shareholders and the Board of Trustees. The Chair shall have such other powers and duties as shall be determined by the Boards of Trustees, and shall undertake such other assignments as may be requested by the Boards of Trustees. If the Chair shall not be present, the Vice Chair, if any, shall preside at all meetings of the Shareholders and the Board of Trustees, if the Vice Chair is present. The Vice Chair shall have such other powers and duties as shall be determined by the Chair or the Boards of Trustees, and shall undertake such other assignments as may be requested by the Chair or the Boards of Trustees."
2. Section 1 of Article III is hereby amended and restated to read in its entirety as follows:
"Section 1. Executive Officers. The initial executive officers of the Trust shall be elected by the Board of Trustees as soon as practicable after the organization of the Trust. The executive officers shall include a President, one or more Vice Presidents (the number thereof to be determined by the Board of Trustees), a Secretary and a Treasurer. The Board of Trustees may also in its discretion appoint Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and other officers, agents and employees, who shall have such authority and perform such duties as the Board may determine. The Board of Trustees may fill any vacancy which may occur in any office. Any two offices, except for those of President and Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument on behalf of the Trust in more than one capacity, if such instrument is required by law or by these Bylaws to be executed, acknowledged or verified by two or more officers."
3. Section 3 of Article III is hereby amended and restated to read in its entirety as follows:
"Section 3. President. The President shall be the chief executive officer of the Trust and, subject to the Board of Trustees, shall generally manage the business and affairs of the Trust. If both the Chair and the Vice Chair are absent, or if the Chair is absent and there is no Vice Chair, the President shall, if present, preside at all meetings of the Shareholders and the Board of Trustees."
4. Section 4 of Article III is hereby deleted in its entirety and remaining Sections 5, 6, 7, 8, 9 and 10 of Article III are hereby renumbered as Sections 4, 5, 6, 7, 8 and 9, respectively.
5. New Section 4 (formerly Section 5) of Article III is hereby amended and restated to read in its entirety as follows:
"Section 4. Vice Presidents. One or more Vice Presidents shall have and exercise such powers and duties of the President in the absence or inability to act of the President, as may be assigned to them, respectively, by the Board of Trustees or, to the extent not so assigned, by the President. In the absence or inability to act of the President, the powers and duties of the President not otherwise assigned by the Board of Trustees or the President shall devolve upon the Vice Presidents in the order of their election."
6. Section 9(a) of Article IV is hereby amended and restated to read in its entirety as follows:
"Section 9. Organization of Meetings.
(a) The meetings of the Shareholders shall be presided over by the Chair, or if the Chair shall not be present, by the Vice Chair, if any, or if the Vice Chair shall not be present or if there is no Vice Chair, by the President, or if the President shall not be present, by a Vice President, or if no Vice President is present, by a chair appointed for such purpose by the Board of Trustees or, if not so appointed, by a chair appointed for such purpose by the officers and Trustees present at the meeting. The Secretary of the Trust, if present, shall act as Secretary of such meetings, or if the Secretary is not present, an Assistant Secretary of the Trust shall so act, and if no Assistant Secretary is present, then a person designated by the Secretary of the Trust shall so act, and if the Secretary has not designated a person, then the meeting shall elect a secretary for the meeting."
7. Capitalized terms not specifically defined herein shall have the meanings ascribed to them in the Trust's Amended and Restated Agreement and Declaration of Trust, as amended.
AMENDMENT NO. 4
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of July 1, 2004, amends the Master Investment Advisory Agreement (the "Agreement"), dated June 21, 2000, between AIM Equity Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to reduce the advisory fee for the AIM Dent Demographic Trends Fund;
NOW, THEREFORE, the parties agree as follows;
1. Appendix B to the Agreement are hereby deleted in their entirety and replaced with the following:
"APPENDIX B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund.
AIM AGGRESSIVE GROWTH FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $150 million................................................................................... 0.80% Over $150 million.................................................................................... 0.625% |
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $350 million.................................................................................. 0.75% Over $350 million.................................................................................... 0.625% |
AIM CHARTER FUND
AIM CONSTELLATION FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $30 million.................................................................................... 1.00% Over $30 million to and including $150 million....................................................... 0.75% Over $150 million.................................................................................... 0.625% |
AIM DENT DEMOGRAPHIC TRENDS FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $2 billion..................................................................................... 0.77% Over $2 billion...................................................................................... 0.72% |
AIM EMERGING GROWTH FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion..................................................................................... 0.85% Over $1 billion...................................................................................... 0.80% |
AIM LARGE CAP BASIC VALUE FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion..................................................................................... 0.60% Over $1 billion to and including $ 2 billion......................................................... 0.575% Over $2 billion...................................................................................... 0.55% |
AIM CORE STRATEGIES FUND
AIM DIVERSIFIED DIVIDEND FUND
AIM LARGE CAP GROWTH FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion..................................................................................... 0.75% Over $1 billion to and including $ 2 billion......................................................... 0.70% Over $2 billion...................................................................................... 0.625% |
AIM MID CAP GROWTH FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion..................................................................................... 0.80% Over $1 billion...................................................................................... 0.75% |
AIM U.S. GROWTH FUND
AIM BASIC VALUE II FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion..................................................................................... 0.75% Over $1 billion to and including $2 billion.......................................................... 0.70% Over $2 billion...................................................................................... 0.65% |
AIM WEINGARTEN FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $30 million.................................................................................... 1.00% Over $30 million to and including $350 million....................................................... 0.75% Over $350 million.................................................................................... 0.625%" |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
AIM EQUITY FUNDS
Attest: /s/ Lisa A. Moss By: /s/ Robert H. Graham
---------------- --------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS INC.
Attest: /s/ Lisa A. Moss By: /s/ Mark H. Williamson
---------------- ----------------------
Assistant Secretary Mark H. Williamson
President
|
(SEAL)
AMENDMENT NO. 5
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of September 15, 2004, amends the Master Investment Advisory Agreement (the "Agreement"); dated June 21, 2000, between AIM Equity Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties desire to amend the Agreement to change the name of portfolio, AIM Basic Value II Fund to AIM Select Basic Value Fund.
NOW, THEREFORE, the parties agree as follows;
1. Appendix A and Appendix B to the Agreement are hereby deleted in their entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT AIM Aggressive Growth Fund June 1, 2000 AIM Blue Chip Fund June 1, 2000 AIM Capital Development Fund June 1, 2000 AIM Charter Fund June 1, 2000 AIM Constellation Fund June 1, 2000 AIM Core Strategies Fund December 28, 2001 AIM Dent Demographic Trends Fund June 1, 2000 AIM Diversified Dividend Fund December 28, 2001 AIM Emerging Growth Fund June 1, 2000 AIM Large Cap Basic Value Fund June 1, 2000 AIM Large Cap Growth Fund June 1, 2000 AIM Mid Cap Growth Fund June 1, 2000 AIM Select Basic Value Fund August 29, 2002 AIM U.S. Growth Fund August 29, 2002 AIM Weingarten Fund June 1, 2000 |
APPENDIX B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund.
AIM AGGRESSIVE GROWTH FUND
NET ASSETS ANNUAL RATE First $150 million.................................................. 0.80% Over $150 million................................................... 0.625% |
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE First $350 million.................................................. 0.75% Over $350 million................................................... 0.625% |
AIM CHARTER FUND
AIM CONSTELLATION FUND
NET ASSETS ANNUAL RATE First $30 million................................................... 1.00% Over $30 million to and including $150 million...................... 0.75% Over $150 million................................................... 0.625% |
AIM DENT DEMOGRAPHIC TRENDS FUND
NET ASSETS ANNUAL RATE First $2 billion.................................................... 0.77% Over $2 billion..................................................... 0.72% |
AIM EMERGING GROWTH FUND
NET ASSETS ANNUAL RATE First $1 billion................................................. 0.85% Over $1 billion.................................................. 0.80% |
AIM LARGE CAP BASIC VALUE FUND
NET ASSETS ANNUAL RATE First $1 billion................................................. 0.60% Over $1 billion to and including $2 billion...................... 0.575% Over $2 billion.................................................. 0.55% |
AIM CORE STRATEGIES FUND
AIM DIVERSIFIED DIVIDEND FUND
AIM LARGE CAP GROWTH FUND
NET ASSETS ANNUAL RATE First $1 billion.................................................. 0.75% Over $1 billion to and including $2 billion....................... 0.70% Over $2 billion................................................... 0.625% |
AIM MID CAP GROWTH FUND
NET ASSETS ANNUAL RATE First $1 billion.................................................. 0.80% Over $1 billion................................................... 0.75% |
AIM SELECT BASIC VALUE FUND
AIM U.S. GROWTH FUND
NET ASSETS ANNUAL RATE First $1 billion.................................................. 0.75% Over $1 billion to and including $2 billion....................... 0.70% Over $2 billion................................................... 0.65% |
AIM WEINGARTEN FUND
NET ASSETS ANNUAL RATE First $30 million................................................. 1.00% Over $30 million to and including $350 million.................... 0.75% Over $350 million................................................. 0.625% |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
AIM EQUITY FUNDS
Attest: /s/ Lisa A. Moss By: /s/ Robert H. Graham
------------------------ ---------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ Lisa A. Moss By: /s/ Mark H. Williamson
------------------------ ---------------------------
Assistant Secretary Mark H. Williamson
President
|
(SEAL)
AMENDMENT NO. 6
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:
The Agreement is amended (1) effective August 18, 2003, with respect to the Portfolios of AIM Growth Series, AIM Investment Funds, AIM Investment Securities Funds and AIM Special Opportunities Funds and (2) effective January 6, 2004, with respect to the Portfolios of AIM Combination Stock & Bond Funds, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM International Mutual Funds, AIM Sector Funds, AIM Stock Funds and AIM Tax-Exempt Funds and AIM Treasurer's Series Trust (AIM Stable Value Fund only) by adding the following sentence as the last sentence of Section FIFTH of the Agreement:
"The Distributor or such other investment dealers or financial institutions will be deemed to have performed all services required to be performed in order to be entitled to receive the asset based sales charge portion of any amounts payable with respect to Class A, Class A3, Class C, Class K, Class R and Investor Class Shares to the Distributor pursuant to a distribution plan adopted by the Fund on behalf of each Portfolio pursuant to Rule 12b-1 under the 1940 Act upon the settlement of each sale of a Class A, Class A3, Class C, Class K, Class R or Investor Class Share (or a share of another portfolio from which such Share derives)."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: January 6, 2004
EACH FUND (LISTED ON SCHEDULE A) ON BEHALF OF THE
SHARES OF EACH PORTFOLIO LISTED ON SCHEDULE A
By: /s/ ROBERT H. GRAHAM
---------------------------------------------
Robert H. Graham
President
|
A I M DISTRIBUTORS, INC.
By: /s/ GENE L. NEEDLES
---------------------------------------------
Gene L. Needles
President
|
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
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
Investor Class
AIM Large Cap Growth Fund - Class A
Class C
Class R
Investor Class
AIM Mid Cap Growth Fund - Class A
Class C
Class R
AIM U.S. Growth Fund - Class A
Class C
2
|
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
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
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 Basic Value Fund - Class A
Class C
Class R
Institutional Class
AIM Mid Cap Core Equity Fund - Class A
Class C
Class R
Institutional Class
AIM Small Cap Growth Fund - Class A
Class C
Class R
Institutional Class
3
|
AIM Global Equity Fund - Class A
Class C
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
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
4
|
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund - Class A
Class C
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
Investor Class
AIM Municipal Bond Fund - Class A
Class C
Investor Class
AIM Short Term Bond Fund - Class C
AIM Total Return Bond Fund - Class A
Class C
AIM Real Estate Fund - Class A
Class C
Investor 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
5
|
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
6
|
AIM TAX-EXEMPT FUND
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: March 31, 2004
EACH FUND (LISTED ON SCHEDULE A) ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A
By: /s/ Mark H. Williamson
-----------------------------------
Mark H. Williamson
Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
-----------------------------------
Gene L. Needles
President
|
AMENDMENT NO. 8 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
2
|
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
3
|
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
4
|
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
5
|
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
6
|
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
7
|
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
By: /s/ Mark H. Williamson
----------------------------------------
Mark H. Williamson
Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
----------------------------------------
Gene L. Needles
President
|
AMENDMENT NO. 9 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 to remove INVESCO Stable Value Fund.
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 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: September 14, 2004
EACH FUND (LISTED ON SCHEDULE A)
ON BEHALF OF THE SHARES OF EACH
PORTFOLIO LISTED ON SCHEDULE A
By: /s/ Mark H. Williamson
-----------------------------
Mark H. Williamson
Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
-----------------------------
Gene L. Needles
President
|
AMENDMENT NO. 10 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 to reflect the name change of the AIM Basic Value II Fund to the AIM Select Basic Value Fund.
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 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 Select Basic Value Fund - Class A
Class C
|
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 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: September 15, 2004
EACH FUND (LISTED ON SCHEDULE A)
ON BEHALF OF THE SHARES OF EACH
PORTFOLIO LISTED ON SCHEDULE A
By: /s/ Mark H. Williamson
-----------------------------
Mark H. Williamson
Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
----------------------------
Gene L. Needles
President
|
AMENDMENT NO. 11 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 to add Investor Class Shares to AIM Capital Development Fund.
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 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
Investor 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 Select Basic Value Fund - Class A
Class C
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 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: ____________, 2004
EACH FUND (LISTED ON SCHEDULE A) ON BEHALF OF THE
SHARES OF EACH PORTFOLIO LISTED ON SCHEDULE A
A I M DISTRIBUTORS, INC.
AMENDMENT NO. 8
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (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-1 and Schedule A-2 to the Agreement (each individually referred to as the "Fund", or collectively, the "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-1 and Schedule A-2 to the Agreement (each, a "Portfolio"), with respect to the Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor"), is hereby amended as follows:
1. Schedule A-1 and Schedule A-2 to the Agreement are hereby deleted in their entirety and replaced with Schedule A-1 and Schedule A-2 attached to this amendment.
All other terms and provisions of the Agreement not amended hereby shall remain in full force and effect.
Dated: March 31, 2004
EACH FUND LISTED ON SCHEDULE A-1 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-1
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
EACH FUND LISTED ON SCHEDULE A-2 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-2
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
-----------------------------------
Name: Gene L. Needles
Title: President
|
SCHEDULE A-1
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM EQUITY FUNDS
PORTFOLIOS
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
AIM Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Emerging Growth Fund
AIM Mid Cap Basic Value Fund
AIM Premier Equity Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM GROWTH SERIES
PORTFOLIOS
AIM Basic Value Fund
AIM Global Equity Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIOS
AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM International Growth Fund
INVESCO International Core Equity Fund
AIM INVESTMENT FUNDS
PORTFOLIOS
AIM Developing Markets Fund
AIM Global Health Care Fund
AIM Libra Fund
AIM Trimark Endeavor Fund
AIM Trimark Fund
AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM Total Return Bond Fund
AIM SPECIAL OPPORTUNITIES FUNDS
PORTFOLIOS
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM TAX-EXEMPT FUNDS
PORTFOLIO
AIM High Income Municipal Fund
SCHEDULE A-2
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM COMBINATION STOCK & BOND FUNDS
PORTFOLIOS
INVESCO Core Equity Fund
INVESCO Total Return Fund
AIM COUNSELOR SERIES TRUST
PORTFOLIOS
INVESCO Advantage Health Sciences Fund
INVESCO Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Technology Fund
INVESCO Utilities Fund
AIM STOCK FUNDS
PORTFOLIOS
INVESCO Dynamics Fund
INVESCO Mid-Cap Growth Fund
INVESCO Small Company Growth Fund
AMENDMENT NO. 9
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (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-1 and Schedule A-2 to the Agreement (each individually referred to as the "Fund", or collectively, the "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-1 and Schedule A-2 to the Agreement (each, a "Portfolio"), with respect to the Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor"), is hereby amended as follows:
1. Schedule A-1 and Schedule A-2 to the Agreement are hereby deleted in their entirety and replaced with Schedule A-1 and Schedule A-2 attached to this amendment.
All other terms and provisions of the Agreement not amended hereby shall remain in full force and effect.
Dated: April 30, 2004
EACH FUND LISTED ON SCHEDULE A-1 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-1
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
EACH FUND LISTED ON SCHEDULE A-2 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-2
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
-----------------------------------
Name: Gene L. Needles
Title: President
|
SCHEDULE A-1
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM EQUITY FUNDS
PORTFOLIOS
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
AIM Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Emerging Growth Fund
AIM Mid Cap Basic Value Fund
AIM Premier Equity Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM GROWTH SERIES
PORTFOLIOS
AIM Aggressive Allocation Fund
AIM Basic Value Fund
AIM Conservative Allocation Fund
AIM Mid Cap Core Equity Fund
AIM Moderate Allocation Fund
AIM Small Cap Growth Fund
AIM Global Trends Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIOS
AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM International Growth Fund
INVESCO International Core Equity Fund
AIM INVESTMENT FUNDS
PORTFOLIOS
AIM Developing Markets Fund
AIM Global Health Care Fund
AIM Libra Fund
AIM Trimark Fund
AIM Trimark Endeavor Fund
AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
AIM Real Estate Fund
AIM SPECIAL OPPORTUNITIES FUNDS
PORTFOLIOS
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM TAX-EXEMPT FUNDS
PORTFOLIO
AIM High Income Municipal Fund
SCHEDULE A-2
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM COMBINATION STOCK & BOND FUNDS
PORTFOLIOS
INVESCO Core Equity Fund
INVESCO Total Return Fund
AIM COUNSELOR SERIES TRUST
PORTFOLIOS
INVESCO Advantage Health Sciences Fund
INVESCO Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Technology Fund
INVESCO Utilities Fund
AIM STOCK FUNDS
INVESCO Dynamics Fund
INVESCO Mid-Cap Growth Fund
INVESCO Small Company Growth Fund
AMENDMENT NO. 10
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (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-1 and Schedule A-2 to the Agreement (each individually referred to as the "Fund", or collectively, the "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-1 and Schedule A-2 to the Agreement (each, a "Portfolio"), with respect to the Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor"), is hereby amended as follows:
1. Schedule A-1 and Schedule A-2 to the Agreement are hereby deleted in their entirety and replaced with Schedule A-1 and Schedule A-2 attached to this amendment.
All other terms and provisions of the Agreement not amended hereby shall remain in full force and effect.
Dated: September 15, 2004
EACH FUND LISTED ON SCHEDULE A-1 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-1
By: /s/ Robert H. Graham
----------------------
Name:
Title:
|
EACH FUND LISTED ON SCHEDULE A-2 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-2
By: /s/ Robert H. Graham
----------------------
Name:
Title:
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
----------------------
Name:
Title:
|
SCHEDULE A-1
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM EQUITY FUNDS
PORTFOLIOS
AIM Aggressive Growth 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 Select Basic Value
AIM U.S. Growth Fund
AIM Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Emerging Growth Fund
AIM Mid Cap Basic Value Fund
AIM Premier Equity Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM GROWTH SERIES
PORTFOLIOS
AIM Aggressive Allocation Fund
AIM Basic Value Fund
AIM Conservative Allocation Fund
AIM Mid Cap Core Equity Fund
AIM Moderate Allocation Fund
AIM Small Cap Growth Fund
AIM Global Trends Fund
PORTFOLIOS
AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM International Growth Fund
INVESCO International Core Equity Fund
PORTFOLIOS
AIM Developing Markets Fund
AIM Global Health Care Fund
AIM Libra Fund
AIM Trimark Fund
AIM Trimark Endeavor Fund
AIM Trimark Small Companies Fund
PORTFOLIOS
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
AIM Real Estate Fund
PORTFOLIOS
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
PORTFOLIO
AIM High Income Municipal Fund
SCHEDULE A-2
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
PORTFOLIOS
INVESCO Core Equity Fund
INVESCO Total Return Fund
PORTFOLIOS
INVESCO Advantage Health Sciences Fund
INVESCO Multi-Sector Fund
PORTFOLIOS
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Technology Fund
INVESCO Utilities Fund
INVESCO Dynamics Fund
INVESCO Mid-Cap Growth Fund
INVESCO Small Company Growth Fund
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM EQUITY FUNDS
AND
AIM INVESTMENT SERVICES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT 3
ARTICLE 2 FEES AND EXPENSES 4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT 5
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND 6
ARTICLE 5 INDEMNIFICATION 6
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT 7
ARTICLE 7 TERMINATION OF AGREEMENT 8
ARTICLE 8 ADDITIONAL FUNDS 8
ARTICLE 9 LIMITATION OF SHAREHOLDER LIABILITY 8
ARTICLE 10 ASSIGNMENT 9
ARTICLE 11 AMENDMENT 9
ARTICLE 12 TEXAS LAW TO APPLY 9
ARTICLE 13 MERGER OF AGREEMENT 9
ARTICLE 14 COUNTERPARTS 9
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TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of July, 2004, by and between AIM Equity Funds, a Delaware statutory trust, having its principal office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the "Fund"), and AIM Investment Services, Inc., a Delaware corporation, having its principal office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate series and classes, with each such series representing interests in a separate portfolio of securities and other assets and each such class having different distribution arrangements; and
WHEREAS, the Fund on behalf of the retail and institutional share classes of each of the Portfolios thereof (the "Portfolios") desires to appoint the Transfer Agent as its transfer agent, and agent in connection with certain other activities, with respect to the Portfolios, and the Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints the Transfer Agent to act as, and the Transfer Agent agrees to act as, its transfer agent for the authorized and issued shares of beneficial interest of the Fund representing interests in the retail and institutional share classes of each of the respective Portfolios ("Shares"), dividend disbursing agent, and agent in connection with any accumulation or similar plans provided to shareholders of each of the Portfolios (the "Shareholders"), including without limitation any periodic investment plan or periodic withdrawal program, as provided in the currently effective prospectus and statement of additional information (the "Prospectus") of the Fund on behalf of the Portfolios.
1.02 The Transfer Agent agrees that it will perform the following services:
(a) The Transfer Agent shall, in accordance with procedures established from time to time by agreement between the Fund on behalf of each of the Portfolios, as applicable, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation thereof to the Custodian of the Fund authorized pursuant to the Charter of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account;
(iii) receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation thereof to the Custodian;
(iv) at the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the Fund;
(v) effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and distributions declared by the Fund on behalf of the Shares;
(vii) maintain records of account for and advise the Fund and its Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and maintain pursuant to SEC Rule 17Ad-1O(e) a record of the total number of Shares which are authorized, based upon data provided to it by the Fund, and issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which function shall be the sole responsibility of the Fund.
(b) In addition to the services set forth in the above paragraph (a), the Transfer Agent shall: perform the customary services of a transfer agent, including but not limited to maintaining all Shareholder accounts, mailing Shareholder reports and prospectuses to current Shareholders, preparing and mailing confirmation forms and statements of accounts to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services in Article 1 may be established from time to time by agreement between the Fund on behalf of each Portfolio and the Transfer Agent. The Transfer Agent may at times perform only a portion of these services and the other agents of the Fund may perform these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent fees as set forth in Schedule A, attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Fund and the Transfer Agent.
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances incurred by the Transfer Agent for the
items set forth in Schedule A. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Fund, will be reimbursed by the Fund on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all fees and reimbursable expenses following the mailing of the respective billing notice. Postage for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Transfer Agent by the Fund at least seven (7) days prior to the mailing date of such materials.
2.04 The Transfer Agent may, from time to time, enter into certain sub-transfer agency, omnibus account service, sub-accounting, and networking agreements whereby a broker/dealer or third party agrees to provide individual shareholder and/or record keeping services with respect to investments in the Portfolios that would otherwise be required to be provided by the Transfer Agent hereunder. The types of accounts serviced through these arrangements may generally include (i) direct investments by individuals whose Shares are held in an omnibus account maintained with the Transfer Agent by a broker or sub-transfer agent; (ii) investments made through various types of retirement and college savings plans; and (iii) investments made through variable group annuities, funds of funds, and other investment vehicles which utilize the Funds as underlying investments. All fees payable under the sub-transfer agency, omnibus account service, sub-accounting, and networking agreements shall be an obligation of the Transfer Agent and not the Portfolios (with the exception of certain out-of-pocket expenses and advances identified under Section 2.02, above, and payments made with respect to the servicing of accounts invested in Institutional Class shares).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and in Texas.
3.03 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
3.06 It is registered as a Transfer Agent as required by the federal securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a statutory trust duly organized and existing and in good standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Agreement and Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Agreement and Declaration of Trust and By-Laws have been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as amended on behalf of each of the Portfolios is currently effective and will remain effective, with respect to all Shares of the Fund being offered for sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund shall on behalf of the applicable Portfolio, indemnify and hold the Transfer Agent harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to:
(a) all actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or subcontractors of information, records and documents or services which (i) are received or relied upon by the Transfer Agent or its agents or subcontractors and/or furnished to it or performed by on behalf of the Fund, and (ii) have been prepared, maintained and/or performed by the Fund or any other person or firm on behalf of the Fund; provided such actions are taken in good faith and without negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any instructions or requests of the Fund on behalf of the applicable Portfolio; provided such actions are taken in good faith and without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out
of or attributable to any action or failure or omission to act by the Transfer Agent as result of the Transfer Agent's lack of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement, and the Transfer Agent and its agents or subcontractors shall not be liable to and shall be indemnified by the Fund on behalf of the applicable Portfolio for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Transfer Agent shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided to the Transfer Agent or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this Article 5 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of each of the Portfolios promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Trustees of the Fund authorizing the appointment of the Transfer Agent and the execution and delivery of this Agreement; and
(b) a copy of the Agreement and Declaration of Trust and By-Laws of the Fund and all amendments thereto.
6.02 The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Transfer Agent
agrees that all such records prepared or maintained by the Transfer Agent relating to the services to be performed by the Transfer Agent hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request.
6.03 The Transfer Agent and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the Shareholder records of the Fund, the Transfer Agent will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Transfer Agent reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person.
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty (60) days written notice to the other.
7.02 Should the Fund exercise its right to terminate this Agreement, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund on behalf of the applicable Portfolios. Additionally, the Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination and/or a charge equivalent to the average of three (3) months' fees.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of Shares in addition to the Portfolios with respect to which it desires to have the Transfer Agent render services as transfer agent under the terms hereof, it shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
ARTICLE 9
LIMITATION OF SHAREHOLDER LIABILITY
9.01 Notice is hereby given that this Agreement is being executed by the Fund by a duly authorized officer thereof acting as such and not individually. The obligations of this Agreement are not binding upon any of the trustees, officers, shareholders or the investment advisor of the Fund individually but are binding only upon the assets and property belonging to the Fund, on its own behalf or on behalf of a Portfolio, for the benefit of which the trustees or directors have caused this Agreement to be executed.
ARTICLE 10
ASSIGNMENT
10.01 Except as provided in Section 10.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.
10.03 The Transfer Agent may, without further consent on the part of the Fund, subcontract for the performance hereof with any entity which is duly registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that the Transfer Agent shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions.
ARTICLE 11
AMENDMENT
11.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Trustees of the Fund.
ARTICLE 12
TEXAS LAW TO APPLY
12.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of Texas.
ARTICLE 13
MERGER OF AGREEMENT
13.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.
ARTICLE 14
COUNTERPARTS
14.01 This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
AIM EQUITY FUNDS
By: /s/ Robert H. Graham
---------------------
President
ATTEST:
/s/ Jim A. Coppedge
-----------------------
Assistant Secretary
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AIM INVESTMENT SERVICES, INC.
By: /s/ William J. Galvin, Jr.
---------------------------
President
ATTEST:
/s/ Jim A. Coppedge
-----------------------
Assistant Secretary
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SCHEDULE A
1. RETAIL SHARE CLASSES
OPEN ACCOUNT FEE. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent an annualized fee for shareholder accounts holding Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares that are open during any monthly period at a rate of $17.08, whether such account is serviced directly by the Transfer Agent or by a third party pursuant to an omnibus account service, sub-accounting, or networking agreement, as provided in Section 2.04 of the Agreement.
CLOSED ACCOUNT FEE. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent an annualized fee for shareholder accounts which previously held Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares that were closed during any monthly period at a rate of $0.70, to be paid for twelve months following the date on which an account was closed, whether such account is serviced directly by the Transfer Agent or by a third party pursuant to an omnibus account service, sub-accounting, or networking agreement, as provided in Section 2.04 of the Agreement.
DETERMINING NUMBER OF BILLABLE ACCOUNTS. To the extent a third party servicing accounts through a sub-transfer agency, omnibus account service, sub-accounting, or networking agreement is unable to provide the number of accounts being serviced (a "non-reporting service provider"), the Transfer Agent may estimate the number of open accounts being serviced by the non-reporting service provider by applying the average size of an account being serviced by the Transfer Agent and all third parties who are able to report the number of accounts being serviced (the "reporting service providers") to the total assets invested in a given Portfolio through the accounts maintained by such non-reporting service provider. The Transfer Agent may then estimate the number of closed accounts being serviced by the non-reporting service provider by applying the ratio of closed accounts to open accounts being serviced by the Transfer Agent and all reporting service providers to the estimated number of open accounts being serviced by the non-reporting service provider.
BILLING OF FEES. Both the Open and Closed Account Fees shall be billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of the annualized fee for all such accounts.
2. INSTITUTIONAL SHARE CLASSES
ACCOUNTS SERVICED BY THE TRANSFER AGENT. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of the Institutional Class Shares of each Portfolio to pay the Transfer Agent a fee equal to $2.00 per trade executed, to be billed monthly in arrears.
ACCOUNTS SERVICED BY THIRD PARTIES. The Fund agrees to reimburse the Transfer Agent for fees paid by the Transfer Agent to third parties who service accounts invested in Institutional Class Shares of a Portfolio pursuant to a sub-transfer agency, omnibus account service, sub-accounting, or networking agreements, as provided in Section 2.04 of the Agreement.
CAP ON TRANSFER AGENCY FEES AND EXPENSES. The Transfer Agent agrees to waive the right to collect any fee or reimbursement to which it is entitled hereunder to the extent that collecting such fee or reimbursement would cause the fees and expenses incurred hereunder by the Institutional Class Shares of any given Portfolio to exceed 0.10% of the average net assets attributable to such Class of such Portfolio.
3. INVESTMENT CREDITS
The total fees due to the Transfer Agent from all funds affiliated with the Fund shall be reduced by an amount equal to the investment income earned by the Transfer Agent, if any, on the balances of the disbursement accounts for those funds. Such credits shall first be allocated to the Institutional Class, if any, of a Portfolio based upon the number of accounts holding shares of such Class relative to the total number of accounts holding all Classes of shares in the Portfolio. The Portfolio's remaining fiscal year-to-date credits shall be allocated among accounts holding Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares, as applicable, on the basis of fiscal year-to-date average net assets.
4. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable out-of-pocket expenses relating to the procurement of the following goods and services, as they relate to the performance of the Transfer Agent's obligations set forth in Article I of the Agreement, including, but not limited to:
o Remote access, license and usage charges paid by the Transfer Agent for use of shareholder record keeping and related systems provided by DST Systems, Inc., and used by the Transfer Agent to service Shareholder accounts, including but not limited to:
o TA2000(R), the record keeping system on which records related to most Shareholder accounts will be maintained;
o TRAC2000(R), the record keeping system on which records related to Shareholder accounts held by and through employer-sponsored retirement plans are maintained;
o Automated Work Distributor--Trademark--, a document imaging, storage and distribution system;
o Financial Access Network, a computer system and related software applications which will provide the necessary interfaces to allow customers to access account information residing on the TA2000 and TRAC2000 systems through aiminvestments.com; and
o PowerSelect--Trademark--, a reporting database that AFS can query to produce reports derived from Shareholder account data residing on the TA2000 and TRAC2000 systems.
o Client specific system enhancements.
o Computer terminals, communication lines, printers and other equipment and any expenses incurred in connection with such terminals and lines.
o Magnetic media tapes and related freight.
o Microfiche, microfilm and electronic image scanning equipment, production and storage costs.
o Telephone and telecommunication costs, including all lease, maintenance and line costs.
o Record retention, retrieval and destruction costs, including, but not limited to exit fees charged by third party record keeping vendors.
o Duplicating services.
o Courier services.
o Ad hoc reports.
o Programming costs, system access and usage fees, electronic presentment service fees, data and document delivery fees, and other related fees and costs paid by the Transfer Agent to Fiserv Solutions, Inc., which relate to the printing and delivery of the following documents to Shareholders and to each Shareholder's broker of record:
o Investment confirmations;
o Periodic account statements;
o Tax forms; and
o Redemption checks.
o Printing costs, including, without limitation, the costs associated with printing certificates, envelopes, checks, stationery, confirmations and statements.
o Postage (bulk, pre-sort, ZIP+4, bar coding, first class).
o Shipping, certified and overnight mail and insurance.
o Certificate insurance.
o Banking charges, including without limitation, incoming and outgoing wire charges.
o Check writing fees.
o Federal Reserve charges for check clearance.
o Rendering fees.
o Third party audit reviews.
o Due diligence mailings.
o Shareholder information and education mailings, including, but not limited to, periodic shareholder newsletters and tax guides.
o Such other miscellaneous expenses reasonably incurred by the Transfer Agent in performing its duties and responsibilities.
The Fund agrees that postage and mailing expenses will be paid on the day of or prior to mailing. In addition, the Fund will promptly reimburse the Transfer Agent for any other unscheduled expenses incurred by the Transfer Agent whenever the Fund and the Transfer Agent mutually agree that such expenses are not otherwise properly borne by the Transfer Agent as part of its duties and obligations under the Agreement.
Out-of-pocket expenses incurred by the Transfer Agent hereunder shall first be allocated among the series portfolios of the AIM Funds and the INVESCO Funds based upon the number of open accounts holding shares in such portfolios. Such out-of-pocket expenses that have been allocated to a Portfolio shall be further allocated to the Institutional Class, if any, of such Portfolio based upon the number of accounts holding shares of such Class relative to the total number of
accounts holding shares of all Classes in the Portfolio. The remaining amount of the Portfolio's fiscal year-to-date out-of-pocket expenses shall be further allocated among accounts holding Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares, as applicable, on the basis of fiscal year-to-date average net assets.
5. DEFINITIONS
As used in this Fee Schedule, "AIM Funds" shall mean all investment companies and their series portfolios, if any, comprising, from time to time, the AIM Family of Funds--Registered Trademark--, and "INVESCO Funds" shall mean all investment companies and their series portfolios, if any, whose shares are exchangeable for shares of the same class of the AIM Funds.
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
This AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made this 1st day of July, 2004 by and between A I M ADVISORS, INC., a Delaware corporation (the "Administrator") and AIM EQUITY FUNDS, a Delaware statutory trust (the "Trust") with respect to the separate series set forth in Appendix A to this Agreement, as the same may be amended from time to time (the "Portfolios").
WITNESSETH:
WHEREAS, the Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust, on behalf of the Portfolios, has retained the Administrator to perform (or arrange for the performance of) accounting, shareholder servicing and other administrative services as well as investment advisory services to the Portfolios, and that the Administrator may receive reasonable compensation or may be reimbursed for its costs in providing such additional services, upon the request of the Board of Trustees and upon a finding by the Board of Trustees that the provision of such services is in the best interest of the Portfolios and their shareholders; and
WHEREAS, the Board of Trustees has found that the provision of such administrative services is in the best interest of the Portfolios and their shareholders, and has requested that the Administrator perform such services;
NOW, THEREFORE, the parties hereby agree as follows:
1. The Administrator hereby agrees to provide, or arrange for the provision of, any or all of the following services by the Administrator or its affiliates:
(a) the services of a principal financial officer of the Trust (including related office space, facilities and equipment) whose normal duties consist of maintaining the financial accounts and books and records of the Trust and the Portfolios, including the review of daily net asset value calculations and the preparation of tax returns; and the services (including related office space, facilities and equipment) of any of the personnel operating under the direction of such principal financial officer;
(b) supervising the operations of the custodian(s), transfer agent(s) or dividend agent(s) for the Portfolios; or otherwise providing services to shareholders of the Portfolios; and
(c) such other administrative services as may be furnished from time to time by the Administrator to the Trust or the Portfolios at the request of the Trust's Board of Trustees.
2. The services provided hereunder shall at all times be subject to the direction and supervision of the Trust's Board of Trustees.
3. As full compensation for the services performed and the facilities furnished by or at the direction of the Administrator, the Trust, on behalf of the Portfolios, shall pay the Administrator in accordance with the Fee Schedule as set forth in Appendix A attached hereto. Such amounts shall be paid to the Administrator on a monthly basis.
4. The Administrator shall not be liable for any error of judgment or for any loss suffered by the Trust or the Portfolios in connection with any matter to which this Agreement relates, except a loss resulting from the Administrator's willful misfeasance, bad faith or gross negligence in the performance of its duties or from reckless disregard of its obligations and duties under this Agreement.
5. The Trust and the Administrator each hereby represent and warrant, but only as to themselves, that each has all requisite authority to enter into, execute, deliver and perform its obligations under this Agreement and that this Agreement is legal, valid and binding, and enforceable in accordance with its terms.
6. Nothing in this Agreement shall limit or restrict the rights of any director, officer or employee of the Administrator who may also be a trustee, officer or employee of the Trust to engage in any other business or to devote his time and attention in part to the management or other aspects of any business, whether of a similar or a dissimilar nature, nor limit or restrict the right of the Administrator to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.
7. This Agreement shall become effective with respect to a Portfolio on the Effective Date for such Portfolio, as set forth in Appendix A attached hereto. This Agreement shall continue in effect until June 30, 2005, and may be continued from year to year thereafter, provided that the continuation of the Agreement is specifically approved at least annually:
(a)(i) by the Trust's Board of Trustees or (ii) by the vote of "a majority of the outstanding voting securities" of such Portfolio (as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the trustees who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of a party to this Agreement (other than as trustees of the Trust), by votes cast in person at a meeting specifically called for such purpose.
This Agreement shall terminate automatically in the event of its assignment (as defined in Section 2(a)(4) of the 1940 Act).
8. This Agreement may be amended or modified with respect to one or more Portfolios, but only by a written instrument signed by both the Trust and the Administrator.
9. Notice is hereby given that, as provided by applicable law, the obligations of or arising out of this Agreement are not binding upon any of the shareholders of the Trust individually but are binding only upon the assets and property of the Trust and that the shareholders shall be entitled, to the fullest extent permitted by applicable law, to the same limitation on personal liability as stockholders of private corporations for profit.
10. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (a) to the Administrator at Eleven Greenway Plaza, Suite 100, Houston, Texas 77046, Attention: President, with a copy to the General Counsel, or (b) to the Trust at Eleven Greenway Plaza, Suite 100, Houston, Texas 77046, Attention: President, with a copy to the General Counsel.
11. This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof.
12. This Agreement shall be governed by and construed in accordance with the laws (without reference to conflicts of law provisions) of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
A I M ADVISORS, INC.
Attest: /s/ Lisa A. Moss By: /s/ Mark H. Williamson
------------------- ----------------------
Assistant Secretary Mark H. Williamson
President
|
(SEAL)
AIM EQUITY FUNDS
Attest: /s/ Lisa A. Moss By: /s/ Robert H. Graham
------------------- --------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
APPENDIX A
FEE SCHEDULE TO
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM EQUITY FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ----------------------------------- --------------------------- AIM Aggressive Growth Fund July 1, 2004 AIM Basic Value II Fund July 1, 2004 AIM Blue Chip Fund July 1, 2004 AIM Capital Development Fund July 1, 2004 AIM Charter Fund July 1, 2004 AIM Constellation Fund July 1, 2004 AIM Core Strategies Fund July 1, 2004 AIM Dent Demographic Trends Fund July 1, 2004 AIM Diversified Dividend Fund July 1, 2004 AIM Emerging Growth Fund July 1, 2004 AIM Large Cap Basic Value Fund July 1, 2004 AIM Large Cap Growth Fund July 1, 2004 AIM Mid Cap Growth Fund July 1, 2004 AIM U.S. Growth Fund July 1, 2004 AIM Weingarten Fund July 1, 2004 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ------------------ 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000.
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement, dated October 29, 2003, is entered into as of the dates indicated on Exhibit "A" between AIM Equity Funds, AIM Floating Rate Fund, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Select Real Estate Income Fund, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Variable Insurance Funds, Short-Term Investments Trust, and Tax-Free Investments Trust (each a "Company" and collectively, the "Companies"), on behalf of the portfolios listed on Exhibit "A" to this Memorandum of Agreement (the "Funds"), and A I M Advisors, Inc. ("AIM"). This Memorandum of Agreement restates the Memorandum of Agreement previously in effect prior to October 29, 2003 and entered into as of the effective dates indicated on Exhibit "A" between AIM Advisor Funds, AIM Equity Funds, AIM Floating Rate Fund, AIM Funds Group, AIM Growth Series, AIM International Funds, Inc. (now known as AIM International Mutual Funds), AIM Investment Funds, AIM Investment Securities Funds, AIM Select Real Estate Income Fund, AIM Series Trust, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Variable Insurance Funds, Short-Term Investments Co., Short-Term Investments Trust, and Tax-Free Investments Co. (now known as Tax-Free Investments Trust), on behalf of the portfolios listed on Exhibit "A" to this Memorandum of Agreement (the "Funds"), and A I M Advisors, Inc. ("AIM").
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Companies and AIM agree as follows:
1. Each Company, for itself and its Funds, and AIM agree that until the expiration date, if any, of the commitment set forth on the attached Exhibit "A" occurs, as such Exhibit "A" is amended from time to time, AIM will not charge any administrative fee under each Fund's advisory agreement in connection with securities lending activities.
2. Neither a Company nor AIM may remove or amend the fee waivers to a Company's detriment prior to requesting and receiving the approval of the Fund's Board to remove or amend such fee waiver as described on the attached Exhibit "A". AIM will not have any right to reimbursement of any amount so waived.
Unless a Company, by vote of its Board of Trustees, or AIM terminates the fee waiver, or a Company and AIM are unable to reach an agreement on the amount of the fee waiver to which the Company and AIM desire to be bound, the fee waiver will continue indefinitely with respect to such Company. Exhibit "A" will be amended to reflect the new date through which a Company and AIM agree to be bound.
Nothing in this Memorandum of Agreement is intended to affect any other memorandum of agreement executed by any Company or AIM with respect to any other fee waivers, expense reimbursements and/or expense limitations
IN WITNESS WHEREOF, each Company, on behalf of itself and its Funds listed in Exhibit "A" to this Memorandum of Agreement, and AIM have entered into this Memorandum of Agreement as of the date indicated on Exhibit "A".
AIM EQUITY FUNDS
AIM FLOATING RATE FUND
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL MUTUAL FUNDS
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SELECT REAL ESTATE INCOME FUND
AIM SUMMIT FUND
AIM TAX-EXEMPT FUNDS
AIM VARIABLE INSURANCE FUNDS
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS TRUST
By: /s/ Robert H. Graham
-----------------------------
Title: President
|
A I M ADVISORS, INC.
By: /s/ Mark H. Williamson
-----------------------------
Title: President
|
EXHIBIT "A"
AIM EQUITY FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Aggressive Growth Fund June 21, 2000 AIM Basic Value II Fund August 29, 2002 AIM Blue Chip Fund June 21, 2000 AIM Capital Development Fund June 21, 2000 AIM Charter Fund June 21, 2000 AIM Constellation Fund June 21, 2000 AIM Core Strategies Fund December 28, 2001 AIM Dent Demographic Trends Fund June 21, 2000 AIM Diversified Dividend Fund December 28, 2001 AIM Emerging Growth Fund June 21, 2000 AIM Large Cap Basic Value Fund June 21, 2000 AIM Large Cap Growth Fund June 21, 2000 AIM Mid Cap Growth Fund June 21, 2000 AIM U.S. Growth Fund August 29, 2002 AIM Weingarten Fund June 21, 2000 |
AIM FLOATING RATE FUND
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Floating Rate Fund September 1, 2001 |
AIM FUNDS GROUP
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Balanced Fund June 1, 2000 AIM Basic Balanced Fund September 28, 2001 AIM European Small Company Fund August 30, 2000 AIM Global Value Fund December 27, 2000 AIM International Emerging Growth Fund August 30, 2000 AIM Mid Cap Basic Value Fund December 27, 2001 AIM Premier Equity Fund June 1, 2000 AIM Select Equity Fund June 1, 2000 AIM Small Cap Equity Fund August 30, 2000 |
AIM GROWTH SERIES
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Basic Value Fund June 5, 2000 AIM Mid Cap Core Equity Fund September 1, 2001 AIM Small Cap Growth Fund September 11, 2000 AIM Global Trends Fund** September 1, 2001 |
* Committed until the Company or AIM requests and receives the approval of the Company's Board to remove or amend such fee waiver. Such commitments are evergreen until amended and apply to each Fund
** Effective November 4, 2003, AIM Global Trends Fund, formerly a series of AIM Series Trust, was restructured as a series of AIM Growth Series.
AIM INTERNATIONAL MUTUAL FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Asia Pacific Growth Fund June 21, 2000 AIM European Growth Fund June 21, 2000 AIM Global Aggressive Growth Fund June 21, 2000 AIM Global Growth Fund June 21, 2000 AIM International Growth Fund June 21, 2000 INVESCO International Core Equity Fund*** November 25, 2003 |
AIM INVESTMENT FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Developing Markets Fund September 1, 2001 AIM Global Health Care Fund September 1, 2001 AIM Libra Fund November 1, 2002 AIM Trimark Endeavor Fund November 4, 2003 AIM Trimark Fund November 4, 2003 AIM Trimark Small Companies Fund November 4, 2003 |
AIM INVESTMENT SECURITIES FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM High Yield Fund June 1, 2000 AIM Income Fund June 1, 2000 AIM Intermediate Government Fund June 1, 2000 AIM Limited Maturity Treasury Fund June 1, 2000 AIM Money Market Fund June 1, 2000 AIM Municipal Bond Fund June 1, 2000 AIM Real Estate Fund**** September 11, 2000 AIM Short Term Bond Fund August 29, 2002 AIM Total Return Bond Fund December 28, 2001 |
AIM SELECT REAL ESTATE INCOME FUND
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Select Real Estate Income Fund May 31, 2002 |
AIM SUMMIT FUND
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM Summit Fund July 24, 2000 |
* Committed until the Company or AIM requests and receives the approval of the Company's Board to remove or amend such fee waiver. Such commitments are evergreen until amended and apply to each Fund.
*** Effective November 25, 2003, INVESCO International Core Equity Fund, formerly a series of AIM International Funds, Inc. II, was redomesticated as a series of AIM International Mutual Funds.
**** Effective October 29, 2003, AIM Real Estate Fund, formerly a series of AIM Advisor Funds, was restructured as a series of AIM Investment Securities Funds.
AIM TAX-EXEMPT FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM High Income Municipal Fund June 1, 2000 AIM Tax-Exempt Cash Fund June 1, 2000 AIM Tax-Free Intermediate Fund June 1, 2000 |
AIM VARIABLE INSURANCE FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- AIM V.I. Aggressive Growth Fund May 1, 2000 AIM V.I. Balanced Fund May 1, 2000 AIM V.I. Basic Value Fund September 10, 2001 AIM V.I. Blue Chip Fund May 1, 2000 AIM V.I. Capital Appreciation Fund May 1, 2000 AIM V.I. Capital Development Fund May 1, 2000 AIM V.I. Core Equity Fund May 1, 2000 AIM V.I. Dent Demographic Trends Fund May 1, 2000 AIM V.I. Diversified Income Fund May 1, 2000 AIM V.I. Global Utilities Fund May 1, 2000 AIM V.I. Government Securities Fund May 1, 2000 AIM V.I. Growth Fund May 1, 2000 AIM V.I. High Yield Fund May 1, 2000 AIM V.I. International Growth Fund May 1, 2000 AIM V.I. Large Cap Growth Fund September 1, 2003 AIM V.I. Mid Cap Core Equity Fund September 10, 2001 AIM V.I. Money Market Fund May 1, 2000 AIM V.I. New Technology Fund May 1, 2000 AIM V.I. Premier Equity Fund May 1, 2000 AIM V.I. Small Cap Equity Fund September 1, 2003 |
SHORT-TERM INVESTMENTS TRUST
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- Government & Agency Portfolio June 1, 2000 Government TaxAdvantage Portfolio June 1, 2000 Treasury Portfolio June 1, 2000 Liquid Assets Portfolio***** June 1, 2000 STIC Prime Portfolio***** June 1, 2000 |
TAX-FREE INVESTMENTS TRUST
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ----------------- --------------- Tax-Free Cash Reserve Portfolio****** June 1, 2000 |
* Committed until the Company or AIM requests and receives the approval of the Company's Board to remove or amend such fee waiver. Such commitments are evergreen until amended and apply to each Fund.
***** Effective November 24, 2003, Liquid Assets and STIC Prime Portfolios, formerly series of Short-Term Investments Co., were restructured as series of Short-Term Investments Trust.
****** Effective November 4, 2003, Tax-Free Cash Reserve Portfolio, formerly a series of Tax-Free Investments Co., was restructured as a series of Tax-Free Investments Trust.
[Letterhead of Ballard Spahr Andrews & Ingersoll, LLP]
September 29, 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. 80 to the Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and Amendment No. 80 to such Registration Statement under the 1940 Act (collectively, the "Registration Statement") relating to the registration of an indefinite number of Investor Class shares of beneficial interest, par value $.001 per share (the "Shares"), of AIM Capital Development Fund (the "Fund").
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 September 14, 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 prospectus for the Fund, which is included in the Registration Statement, substantially in the form in which it is to become effective (the "Prospectus"). 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 Prospectus are duly authorized and, when sold, issued and paid for as described in the Prospectus for the Fund, will be validly issued, fully paid and nonassessable.
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 the Fund for all loss and expense of any shareholder held personally liable for the obligations of the Fund. Therefore, the risk of any shareholder incurring financial loss beyond his investment due to shareholder liability is limited to circumstances in which the 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 Fund, which is included in the Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 80 to the Registration Statement (Form N-1A No. 2-25469).
ERNST & YOUNG LLP
Houston, Texas
September 23, 2004
AMENDMENT NO. 6
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective March 31, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class A Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class A Shares of each Portfolio to the average daily net assets of the Class A Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class A Shares of the Portfolio.
MINIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.10% 0.25% 0.35%
INVESCO Total Return Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Multi-Sector Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.00% 0.25% 0.25%
AIM Basic Value II Fund 0.10% 0.25% 0.35%
AIM Blue Chip Fund 0.10% 0.25% 0.35%
AIM Capital Development Fund 0.10% 0.25% 0.35%
AIM Charter Fund 0.05% 0.25% 0.30%
AIM Constellation Fund 0.05% 0.25% 0.30%
AIM Core Strategies Fund 0.10% 0.25% 0.35%
AIM Dent Demographic Trends Fund 0.10% 0.25% 0.35%
AIM Diversified Dividend Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Large Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Large Cap Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Growth Fund 0.10% 0.25% 0.35%
AIM U.S. Growth Fund 0.10% 0.25% 0.35%
AIM Weingarten Fund 0.05% 0.25% 0.30%
|
MINIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.00% 0.25% 0.25%
AIM Basic Balanced Fund 0.10% 0.25% 0.35%
AIM European Small Company Fund 0.10% 0.25% 0.35%
AIM Global Value Fund 0.10% 0.25% 0.35%
AIM International Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Premier Equity Fund 0.00% 0.25% 0.25%
AIM Select Equity Fund 0.00% 0.25% 0.25%
AIM Small Cap Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Global Equity Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.10% 0.25% 0.35%
AIM European Growth Fund 0.10% 0.25% 0.35%
AIM Global Aggressive Growth Fund 0.25% 0.25% 0.50%
AIM Global Growth Fund 0.25% 0.25% 0.50%
AIM International Growth Fund 0.05% 0.25% 0.30%
INVESCO International Core Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.25% 0.25% 0.50%
AIM Global Health Care Fund 0.25% 0.25% 0.50%
AIM Libra Fund 0.10% 0.25% 0.35%
AIM Trimark Endeavor Fund 0.10% 0.25% 0.35%
AIM Trimark Fund 0.10% 0.25% 0.35%
AIM Trimark Small Companies Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Limited Maturity Treasury Fund 0.00% 0.15% 0.15%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
AIM Real Estate Fund 0.10% 0.25% 0.35%
AIM Total Return Bond Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.10% 0.25% 0.35%
INVESCO Financial Services Fund 0.10% 0.25% 0.35%
INVESCO Gold & Precious Metals Fund 0.10% 0.25% 0.35%
INVESCO Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Leisure Fund 0.10% 0.25% 0.35%
INVESCO Technology Fund 0.10% 0.25% 0.35%
INVESCO Utilities Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.10% 0.25% 0.35%
AIM Opportunities II Fund 0.10% 0.25% 0.35%
AIM Opportunities III Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.10% 0.25% 0.35%
INVESCO Mid-Cap Growth Fund 0.10% 0.25% 0.35%
INVESCO Small Company Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.00% 0.25% 0.25%
AIM Tax-Exempt Cash Fund 0.00% 0.25% 0.25%"
|
* The Distribution Fee is payable apart from the sales charge, if any, as stated in the current prospectus for the applicable Portfolio (or Class thereof).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: March 31, 2004
AMENDMENT NO. 7
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class A Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class A Shares of each Portfolio to the average daily net assets of the Class A Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class A Shares of the Portfolio.
MINIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.10% 0.25% 0.35%
INVESCO Total Return Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Multi-Sector Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.00% 0.25% 0.25%
AIM Basic Value II Fund 0.10% 0.25% 0.35%
AIM Blue Chip Fund 0.10% 0.25% 0.35%
AIM Capital Development Fund 0.10% 0.25% 0.35%
AIM Charter Fund 0.05% 0.25% 0.30%
AIM Constellation Fund 0.05% 0.25% 0.30%
AIM Core Strategies Fund 0.10% 0.25% 0.35%
AIM Dent Demographic Trends Fund 0.10% 0.25% 0.35%
AIM Diversified Dividend Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Large Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Large Cap Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Growth Fund 0.10% 0.25% 0.35%
AIM U.S. Growth Fund 0.10% 0.25% 0.35%
AIM Weingarten Fund 0.05% 0.25% 0.30%
|
MINIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.00% 0.25% 0.25%
AIM Basic Balanced Fund 0.10% 0.25% 0.35%
AIM European Small Company Fund 0.10% 0.25% 0.35%
AIM Global Value Fund 0.10% 0.25% 0.35%
AIM International Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Premier Equity Fund 0.00% 0.25% 0.25%
AIM Select Equity Fund 0.00% 0.25% 0.25%
AIM Small Cap Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Allocation Fund 0.10% 0.25% 0.35%
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Conservative Allocation Fund 0.10% 0.25% 0.35%
AIM Global Equity Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.10% 0.25% 0.35%
AIM Moderate Allocation Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.10% 0.25% 0.35%
AIM European Growth Fund 0.10% 0.25% 0.35%
AIM Global Aggressive Growth Fund 0.25% 0.25% 0.50%
AIM Global Growth Fund 0.25% 0.25% 0.50%
AIM International Growth Fund 0.05% 0.25% 0.30%
INVESCO International Core Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.25% 0.25% 0.50%
AIM Global Health Care Fund 0.25% 0.25% 0.50%
AIM Libra Fund 0.10% 0.25% 0.35%
AIM Trimark Endeavor Fund 0.10% 0.25% 0.35%
AIM Trimark Fund 0.10% 0.25% 0.35%
AIM Trimark Small Companies Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Limited Maturity Treasury Fund 0.00% 0.15% 0.15%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
AIM Real Estate Fund 0.10% 0.25% 0.35%
AIM Short Term Bond Fund 0.10% 0.25% 0.35%
AIM Total Return Bond Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.10% 0.25% 0.35%
INVESCO Financial Services Fund 0.10% 0.25% 0.35%
INVESCO Gold & Precious Metals Fund 0.10% 0.25% 0.35%
INVESCO Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Leisure Fund 0.10% 0.25% 0.35%
INVESCO Technology Fund 0.10% 0.25% 0.35%
INVESCO Utilities Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.10% 0.25% 0.35%
AIM Opportunities II Fund 0.10% 0.25% 0.35%
AIM Opportunities III Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.10% 0.25% 0.35%
INVESCO Mid-Cap Growth Fund 0.10% 0.25% 0.35%
INVESCO Small Company Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.00% 0.25% 0.25%
AIM Tax-Exempt Cash Fund 0.00% 0.25% 0.25%"
|
* The Distribution Fee is payable apart from the sales charge, if any, as stated in the current prospectus for the applicable Portfolio (or Class thereof).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 30, 2004
AMENDMENT NO. 6
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective March 31, 2004, as follows:
1. Schedule A to the Plan is hereby deleted and replaced in its entirety with Schedule A attached hereto.
All other terms and provisions of the Plan not amended hereby shall remain in full force and effect.
Dated: March 31, 2004
SCHEDULE A
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
DISTRIBUTION AND SERVICE FEES
The Fund shall pay the Distributor or the Assignee as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class B Shares of each Portfolio designated below, a Distribution Fee and a Service Fee determined by applying the annual rate set forth below to the average daily net assets of the Class B Shares of the Portfolio. Average daily net assets shall be computed in a manner used for the determination of the offering price of Class B Shares of the Portfolio.
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.75% 0.25% 1.00%
|
MAXIMUM
AIM COMBINATION STOCK & ASSET
BOND FUNDS BASED MAXIMUM MAXIMUM
----------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
AMENDMENT NO. 7
TO
AMENDED AND RESTATED MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
1. Schedule A to the Plan is hereby deleted and replaced in its entirety with Schedule A attached hereto.
All other terms and provisions of the Plan not amended hereby shall remain in full force and effect.
SCHEDULE A
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
DISTRIBUTION AND SERVICE FEES
The Fund shall pay the Distributor or the Assignee as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class B Shares of each Portfolio designated below, a Distribution Fee and a Service Fee determined by applying the annual rate set forth below to the average daily net assets of the Class B Shares of the Portfolio. Average daily net assets shall be computed in a manner used for the determination of the offering price of Class B Shares of the Portfolio.
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Allocation Fund 0.75% 0.25% 1.00%
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Moderate Allocation Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
AIM Global Trends Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.75% 0.25% 1.00%
|
AIM COMBINATION STOCK & MAXIMUM
BOND FUNDS BASED MAXIMUM MAXIMUM
----------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health
Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
AMENDMENT NO. 6
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective March 31, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class C Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class C Shares of each Portfolio to the average daily net assets of the Class C Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class C Shares of the Portfolio.
MAXIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Advantage Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
AIM Short Term Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM High Income Municipal Fund 0.75% 0.25% 1.00%"
|
* The Distribution Fee is payable apart from the sales charge, if any, as stated in the current prospectus for the applicable Portfolio (or Class thereof).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: March 31, 2004
AMENDMENT NO. 7
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class C Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class C Shares of each Portfolio to the average daily net assets of the Class C Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class C Shares of the Portfolio.
MAXIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Aggressive Allocation Fund 0.75% 0.25% 1.00%
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Moderate Allocation Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
AIM Short Term Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM High Income Municipal Fund 0.75% 0.25% 1.00%"
|
* The Distribution Fee is payable apart from the sales charge, if any, as stated in the current prospectus for the applicable Portfolio (or Class thereof).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 30, 2004
AMENDMENT NO. 4
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS R SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS R SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class R Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class R Shares of each Portfolio to the average daily net assets of the Class R Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class R Shares of the Portfolio.
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.25% 0.25% 0.50%
AIM Blue Chip Fund 0.25% 0.25% 0.50%
AIM Capital Development Fund 0.25% 0.25% 0.50%
AIM Charter Fund 0.25% 0.25% 0.50%
AIM Constellation Fund 0.25% 0.25% 0.50%
AIM Large Cap Basic Value Fund 0.25% 0.25% 0.50%
AIM Large Cap Growth Fund 0.25% 0.25% 0.50%
AIM Mid Cap Growth Fund 0.25% 0.25% 0.50%
AIM Weingarten Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.25% 0.25% 0.50%
AIM Basic Balanced Fund 0.25% 0.25% 0.50%
AIM Mid Cap Basic Value Fund 0.25% 0.25% 0.50%
AIM Premier Equity Fund 0.25% 0.25% 0.50%
AIM Small Cap Equity Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Allocation Fund 0.25% 0.25% 0.50%
AIM Basic Value Fund 0.25% 0.25% 0.50%
AIM Conservative Allocation Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.25% 0.25% 0.50%
AIM Moderate Allocation Fund 0.25% 0.25% 0.50%
AIM Small Cap Growth Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM European Growth Fund 0.25% 0.25% 0.50%
AIM International Growth Fund 0.25% 0.25% 0.50%
INVESCO International Core Equity Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Trimark Endeavor Fund 0.25% 0.25% 0.50%
AIM Trimark Fund 0.25% 0.25% 0.50%
AIM Trimark Small Companies Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Income Fund 0.25% 0.25% 0.50%
AIM Intermediate Government Fund 0.25% 0.25% 0.50%
AIM Money Market Fund 0.25% 0.25% 0.50%
AIM Real Estate Fund 0.25% 0.25% 0.50%
AIM Short Term Bond Fund 0.25% 0.25% 0.50%
AIM Total Return Bond Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM TREASURER'S SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Stable Value Fund 0.25% 0.25% 0.50%
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 30, 2004
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
(EFFECTIVE JULY 1, 2004)
SECTION 1. Each registered investment company, as described in Schedule A to this plan (each individually referred to as "Fund", or collectively, "Funds"), severally, on behalf of each of its series of beneficial interest set forth in Schedule A to this plan (each, a "Portfolio"), may act as a distributor of the Investor Class Shares of such Portfolio (the "Shares") of which such Fund is the issuer, pursuant to Rule12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according to the terms of this Amended and Restated Master Distribution Plan (the "Plan").
SECTION 2. The Fund may incur expenses pursuant to this Plan on behalf of a Portfolio at the applicable annual rate set forth on Schedule A under "Maximum Aggregate Fee" of the average daily net assets of the Portfolio attributable to the Shares.
Expenses incurred pursuant to this Plan shall be subject to any applicable limitations imposed from time to time by the applicable rules of NASD Inc. ("NASD").
SECTION 3. The Fund may expend amounts under this Plan to finance distribution-related services for the Shares of each Portfolio. Distribution-related services shall mean any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, organizing and conducting sales seminars, implementing advertising programs, engaging finders and paying finders fees, printing prospectuses and statements of additional information (and supplements thereto) and annual and semi-annual reports for other than existing shareholders, preparing and distributing advertising material and sales literature, making supplemental payments to dealers and other institutions as asset-based sales charges, and administering this Plan.
The Fund has selected A I M Distributors, Inc. ("Distributors") to provide distribution-related services on behalf of and for the Shares of each Portfolio. Distributors may provide such distribution-related services either directly or through third parties.
The specific activities and services to be provided by Distributors hereunder shall include one or more of the following: (a) the payment of compensation (including trail commissions and incentive compensation) to securities dealers, financial institutions and other organizations, which may include Distributors-affiliated companies, that render distribution and administrative services in connection with the distribution of the Fund's Investor Class Shares; (b) the printing and distribution of reports and prospectuses for the use of potential investors in the Fund; (c) the preparing and distributing of sales literature; (d) the providing of advertising and engaging in other promotional activities, including direct mail solicitation, and television, radio, newspaper and other media advertisements; and (e) the providing of such other services and activities as may from time to time be agreed upon by the Fund.
SECTION 4. The Fund may also expend amounts under this Plan to finance payments of service fees under arrangements for personal continuing shareholder services. Personal continuing shareholder services may include, but shall not be limited to, the following: (i) distributing sales literature to customers; (ii) answering routine customer inquiries concerning the Fund and the Shares; (iii) assisting customers in changing dividend options, account designations and addresses, and in enrolling in any of several retirement plans offered in connection with the purchase of
Shares; (iv) assisting customers in the establishment and maintenance of customer accounts and records, and in the placement of purchase and redemption transactions; (v) assisting customers in investing dividends and capital gains distributions automatically in Shares; and (vi) providing such other information and services as the Fund or the customer may reasonably request.
Distributors may implement these arrangements either directly or through third parties.
SECTION 5. All amounts expended pursuant to this Plan shall be paid to Distributors pursuant to the related agreement to this Plan attached hereto as Exhibit A and are the legal obligation of the Fund and not of Distributors. The maximum service fee payable by the Fund on behalf of a Portfolio for personal continuing shareholder services shall be twenty-five one-hundredths of one percent (0.25%), or such lower rate for the Portfolio as is specified on Schedule A, per annum of the average daily net assets of the Portfolio attributable to the Shares owned by the customers of entity providing such shareholder services.
No provision of this Plan shall be interpreted to prohibit any payments by the Fund with respect to the Shares of a Portfolio during periods when the Fund has suspended or otherwise limited sales of such Shares.
SECTION 6. Distributors shall provide to the Fund's Board of Trustees ("Board of Trustees") and the Board of Trustees shall review, at least quarterly, a written report of the amounts expended under this Plan and the purposes for which such expenditures were made.
SECTION 7. This Plan and any agreement related to this Plan shall become effective immediately, with respect to any Portfolio, upon the receipt by the applicable Fund of both (a) the affirmative vote of a majority of the Board of Trustees of the Fund, and (b) the affirmative vote of a majority of those trustees ("Trustees") of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Dis-interested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreement.
SECTION 8. Any material amendments to this Plan must be approved, with respect to any Portfolio, by both (a) the affirmative vote of a majority of the Board of Trustees of the applicable Fund, and (b) the affirmative vote of a majority of the Dis-interested Trustees, cast in person at a meeting called for the purpose of voting on the amendment. In addition, this Plan may not be amended with respect to the Shares of any Portfolio to increase materially the amount to be spent for distribution provided for in Section 2 hereof unless such amendment is approved by a "majority of the outstanding voting securities" (as defined in the 1940 Act) of the Shares of such Portfolio.
SECTION 9. Unless sooner terminated pursuant to Section 10, this Plan and any related agreement shall continue in effect for the Shares of each Portfolio until June 30, 2005 and thereafter each shall continue in effect so long as such continuance is specifically approved, at least annually, in the manner provided for approval of this Plan in Section 7.
SECTION 10. This Plan may be terminated with respect to the Shares of any Portfolio at any time by vote of a majority of the Dis-interested Trustees of the applicable Fund, or by vote of a majority of the outstanding Shares of such Portfolio. If this Plan is terminated with respect to a Portfolio, the obligation of the Fund to make payments pursuant to this Plan with respect to such Portfolio will also cease and the Fund will not be required to make any payments with respect to such Portfolio beyond the termination date.
SECTION 11. Any agreement related to this Plan shall be made in writing, and shall provide:
(a) that such agreement may be terminated at any time, with respect to the Shares of any Portfolio, without payment of any penalty, by vote of a majority of the Dis-interested Trustees of the applicable Fund or by a vote of the outstanding Shares of such Portfolio, on not more than sixty (60) days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its assignment.
SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Investor Class Shares of each Portfolio designated below, a Distribution Fee and a Service Fee determined by applying the annual rate set forth below as to the Investor Class Shares of each Portfolio to the average daily net assets of the Investor Class Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Investor Class Shares of the Portfolio.
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
AIM Blue Chip Fund 0.00% 0.25% 0.25%
AIM Large Cap Basic Value Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO International Core Equity Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.00% 0.25% 0.25%
INVESCO Financial Services Fund 0.00% 0.25% 0.25%
INVESCO Gold & Precious Metals Fund 0.00% 0.25% 0.25%
INVESCO Health Sciences Fund 0.00% 0.25% 0.25%
INVESCO Leisure Fund 0.00% 0.25% 0.25%
INVESCO Utilities Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Mid-Cap Growth Fund 0.00% 0.25% 0.25%
INVESCO S&P 500 Index Fund 0.00% 0.25% 0.25%
|
AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), effective July 1, 2004, pursuant to Rule 12b-1, is hereby amended, effective ______________, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Investor Class Shares of each Portfolio designated below, a Distribution Fee and a Service Fee determined by applying the annual rate set forth below as to the Investor Class Shares of each Portfolio to the average daily net assets of the Investor Class Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Investor Class Shares of the Portfolio.
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
AIM Blue Chip Fund 0.00% 0.25% 0.25%
AIM Capital Development Fund 0.00% 0.25% 0.25%
AIM Large Cap Basic Value Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO International Core Equity Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.00% 0.25% 0.25%
INVESCO Financial Services Fund 0.00% 0.25% 0.25%
INVESCO Gold & Precious Metals Fund 0.00% 0.25% 0.25%
INVESCO Health Sciences Fund 0.00% 0.25% 0.25%
INVESCO Leisure Fund 0.00% 0.25% 0.25%
INVESCO Utilities Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Mid-Cap Growth Fund 0.00% 0.25% 0.25%
INVESCO S&P 500 Index Fund 0.00% 0.25% 0.25%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: ____________, 2004
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
(EFFECTIVE JULY 1, 2004)
SECTION 1. Each registered investment company, as described in Schedule A to this plan (each individually referred to as "Fund", or collectively, "Funds"), severally, on behalf of each of its series of beneficial interest set forth in Schedule A to this plan (each, a "Portfolio"), may act as a distributor of the Investor Class Shares of such Portfolio (the "Shares") of which such Fund is the issuer, pursuant to Rule12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according to the terms of this Amended and Restated Master Distribution Plan (the "Plan").
SECTION 2. Each Fund, on behalf of a Portfolio, is hereby authorized to expend, out of its assets, on a monthly basis, and shall reimburse A I M Distributors, Inc. ("Distributors") to such extent, for Distributors' actual direct expenditures incurred over a rolling twelve-month period (or the rolling twenty-four month period specified below) in engaging in the activities and providing the services specified in Sections 3 and 4 below, an amount computed at an annual rate of 0.25% of the average daily net assets of such Portfolio during the month. Distributors shall not be entitled hereunder to reimbursement for overhead expenses (overhead expenses defined as customary overhead not including the costs of Distributors' personnel whose primary responsibilities involve marketing of the Funds). Payments by a Fund on behalf of a Portfolio hereunder, for any month, may be made only with respect to: (a) expenditures incurred by Distributors during the rolling twelve-month period in which that month falls, or (b) to the extent permitted by applicable law, for any month during the first twenty-four months following a Portfolio's commencement of operations, expenditures incurred by Distributors during the rolling twenty-four month period in which that month falls, and any expenditures incurred in excess of the limitations described above are not reimbursable. No Fund on behalf of a Portfolio shall be authorized to expend, for any month, a greater amount out of its assets to reimburse Distributors for expenditures incurred during the rolling twenty-four month period referred to above than it would otherwise be authorized to expend out of its assets to reimburse Distributors for expenditures incurred during the rolling twelve-month period referred to above.
Expenses incurred pursuant to this Plan shall be subject to any applicable limitations imposed from time to time by the applicable rules of NASD Inc. ("NASD").
SECTION 3. The Fund may expend amounts under this Plan to finance distribution-related services for the Shares of each Portfolio. Distribution-related services shall mean any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, organizing and conducting sales seminars, implementing advertising programs, engaging finders and paying finders fees, printing prospectuses and statements of additional information (and supplements thereto) and annual and semi-annual reports for other than existing shareholders, preparing and distributing advertising material and sales literature, making supplemental payments to dealers and other institutions as asset-based sales charges, and administering this Plan.
The Fund has selected Distributors to provide distribution-related services on behalf of and for the Shares of each Portfolio. Distributors may provide such distribution-related services either directly or through third parties.
The specific activities and services to be provided by Distributors hereunder shall include one or more of the following: (a) the payment of compensation (including trail commissions and incentive compensation) to securities dealers, financial institutions and other organizations, which may include Distributors-affiliated companies, that render distribution and administrative services in connection with the distribution of the Fund's Investor Class Shares; (b) the printing and distribution of reports and prospectuses for the use of potential investors in the Fund; (c) the preparing and distributing of sales literature; (d) the providing of advertising and engaging in other promotional activities, including direct mail solicitation, and television, radio, newspaper and other media advertisements; and (e) the providing of such other services and activities as may from time to time be agreed upon by the Fund.
SECTION 4. The Fund, on behalf of a Portfolio, may also expend amounts
under this Plan to finance payments of service fees under arrangements for
personal continuing shareholder services, up to a maximum annual rate of 0.25%
of the average daily net assets of the Investor Class Shares of such Portfolio.
Personal continuing shareholder services may include, but shall not be limited
to, the following: (i) distributing sales literature to customers; (ii)
answering routine customer inquiries concerning the Fund and the Shares; (iii)
assisting customers in changing dividend options, account designations and
addresses, and in enrolling in any of several retirement plans offered in
connection with the purchase of Shares; (iv) assisting customers in the
establishment and maintenance of customer accounts and records, and in the
placement of purchase and redemption transactions; (v) assisting customers in
investing dividends and capital gains distributions automatically in Shares; and
(vi) providing such other information and services as the Fund or the customer
may reasonably request.
Distributors may implement these arrangements either directly or through third parties.
SECTION 5. All amounts expended pursuant to this Plan shall be paid to Distributors pursuant to the related agreement to this Plan attached hereto as Exhibit A and are the legal obligation of the Fund and not of Distributors. The maximum service fee payable by the Fund on behalf of a Portfolio for personal continuing shareholder services shall be twenty-five one-hundredths of one percent (0.25%), or such lower rate for the Portfolio as is specified on Schedule A, per annum of the average daily net assets of the Portfolio attributable to the Shares owned by the customers of entity providing such shareholder services.
No provision of this Plan shall be interpreted to prohibit any payments by the Fund with respect to the Shares of a Portfolio during periods when the Fund has suspended or otherwise limited sales of such Shares.
SECTION 6. Distributors shall provide to the Fund's Board of Trustees ("Board of Trustees") and the Board of Trustees shall review, at least quarterly, a written report of the amounts expended under this Plan and the purposes for which such expenditures were made.
SECTION 7. This Plan and any agreement related to this Plan shall become effective immediately, with respect to any Portfolio, upon the receipt by the applicable Fund of both (a) the affirmative vote of a majority of the Board of Trustees of the Fund, and (b) the affirmative vote of a majority of those trustees ("Trustees") of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Dis-interested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreement.
SECTION 8. Any material amendments to this Plan must be approved, with respect to any Portfolio, by both (a) the affirmative vote of a majority of the Board of Trustees of the applicable Fund, and (b) the affirmative vote of a majority of the Dis-interested Trustees, cast in person at a meeting called for the purpose of voting on the amendment. In addition, this Plan may not be amended with respect to the Shares of any Portfolio to increase materially the amount to be spent for distribution provided for in Section 2 hereof unless such amendment is approved by a "majority of the outstanding voting securities" (as defined in the 1940 Act) of the Shares of such Portfolio.
SECTION 9. Unless sooner terminated pursuant to Section 10, this Plan and any related agreement shall continue in effect for the Shares of each Portfolio until June 30, 2005 and thereafter each shall continue in effect so long as such continuance is specifically approved, at least annually, in the manner provided for approval of this Plan in Section 7.
SECTION 10. This Plan may be terminated with respect to the Shares of any Portfolio at any time by vote of a majority of the Dis-interested Trustees of the applicable Fund, or by vote of a majority of the outstanding Shares of such Portfolio. If this Plan is terminated with respect to a Portfolio, the obligation of the Fund to make payments pursuant to this Plan with respect to such Portfolio will also cease and the Fund will not be required to make any payments with respect to such Portfolio beyond the termination date.
SECTION 11. Any agreement related to this Plan shall be made in writing, and shall provide:
(a) that such agreement may be terminated at any time, with respect to the Shares of any Portfolio, without payment of any penalty, by vote of a majority of the Dis-interested Trustees of the applicable Fund or by a vote of the outstanding Shares of such Portfolio, on not more than sixty (60) days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its assignment.
SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
PORTFOLIO - INVESTOR CLASS SHARES
INVESCO Core Equity Fund
INVESCO Total Return Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM Large Cap Growth Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM European Growth Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
PORTFOLIO - INVESTOR CLASS SHARES
INVESCO Technology Fund
PORTFOLIO - INVESTOR CLASS SHARES
INVESCO Dynamics Fund
INVESCO Small Company Growth Fund
[AIM INVESTMENTS LOGO] MASTER RELATED AGREEMENT TO
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(COMPENSATION)
(INVESTOR CLASS SHARES)
This Master Related Agreement (the "Agreement") is entered into in accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") by each registered investment company, listed in Schedule A to this Agreement (each individually referred to as a "Fund", or collectively, "Funds"), severally, on behalf of each of the series of common stock or beneficial interest, as the case may be, set forth in Schedule A to this Agreement (each, a "Portfolio"), with respect to the Investor Class Shares of each such Portfolio listed on Schedule A. This Agreement, being made between A I M Distributors, Inc. ("Distributors") and each Fund, on behalf of each applicable Portfolio, defines the services to be provided by Distributors, or its designees, for which it is to receive payments pursuant to the Amended and Restated Master Distribution Plan (Investor Class Shares) (the "Plan") adopted by each of the Funds. The Plan has been approved by a majority of the directors/trustees ("Trustees") of each of the Funds, including a majority of the Trustees who have no direct or indirect financial interest in the operation of the Plan or this Agreement (the "Dis-Interested Trustees"), by votes cast in person at a meeting called for the purpose of voting on the Plan.
1. a. Distributors may use payments received pursuant to Paragraph 2 of this Agreement to provide continuing personal shareholder services to customers who may, from time to time, directly or beneficially own shares of the Funds. Continuing personal shareholder services may include but are not limited to, distributing sales literature to customers, answering routine customer inquiries regarding the Funds, assisting customers in changing dividend options, account designations and addresses, and in enrolling in any of several special investment plans offered in connection with the purchase of the Funds' shares, assisting customers in the establishment and maintenance of customer accounts and records and in the placement of purchase and redemption transactions, assisting customers in investing dividends and capital gains distributions automatically in shares, and providing such other services as the Funds or the customer may reasonably request and Distributors agrees to provide. Distributors will not be obligated to provide services which are provided by a transfer agent for a Fund with respect to a Portfolio.
b. Distributors may also use the payments received pursuant to Paragraph 2 of this Agreement for distribution-related services. As used in this Agreement, "distribution-related services" shall mean any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, organizing and conducting sales seminars, implementing advertising programs, engaging finders and paying finders fees, printing prospectuses and statements of additional information (and supplements thereto) and annual and semi-annual reports for other than existing shareholders, preparing and distributing advertising material and sales literature, making supplemental payments to dealers and other institutions as asset-based sales charges, and administering the Plan.
c. Distributors may provide the services described in paragraphs a. and
b. above either directly or through third parties (its "designees").
2. For the services provided by Distributors or its designees pursuant to this Agreement, each Fund shall pay Distributors a fee, calculated at the end of each month at the annual rate set forth in Schedule A, or such lesser rate as shall be agreed to by Distributors, as applied to the average net asset value of the shares of such Fund purchased or acquired through exchange on or after the Plan Calculation Date shown for such Fund on Schedule A.
3. The total of the fees calculated for all of the Funds listed on Schedule A for any period with respect to which calculations are made shall be paid to Distributors within 10 days after the close of each month.
4. Distributors shall furnish the Funds with such information as shall reasonably be requested by the Trustees of the Funds with respect to the fees paid to Distributors pursuant to this Agreement.
5. Distributors shall furnish the Trustees of the Funds, for their review on a quarterly basis, a written report of the amounts expended under the Plan and the purposes for which such expenditures were made.
6. Distributors may enter into other similar Master Related Agreements with any other investment company without a Fund's consent.
7. This Agreement shall become effective immediately upon its approval by a majority of the Trustees of each of the Funds, including a majority of the Dis-Interested Trustees, by votes cast in person at a meeting called for the purpose of voting on the Plan and this Agreement.
8. This Agreement shall continue in full force and effect as long as the continuance of the Plan and this Agreement are approved at least annually by a vote of the Trustees, including a majority of the Dis-Interested Trustees, cast in person at a meeting called for the purpose of voting thereon.
9. This Agreement may be terminated with respect to any Fund at any time without payment of any penalty by the vote of a majority of the Trustees of such Fund who are Dis-interested Trustees or by a vote of a majority of the Fund's outstanding shares, on sixty (60) days' written notice. It will be terminated by any act which terminates the Fund's Plan, and in any event, it shall terminate automatically in the event of its assignment as that term is defined in the 1940 Act.
10. This Agreement may be amended by mutual written agreement of the parties.
11. All communications should be sent to the address of each signor as shown at the bottom of this Agreement.
12. This Agreement shall be construed in accordance with the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: President
EFFECTIVE [DATE]. FUND (LISTED IN SCHEDULE A)
on behalf of the Investor Class Shares of each
Portfolio listed on Schedule A
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
|
SCHEDULE "A" TO
RELATED AGREEMENT
Maximum Aggregate
Fund Fee Rate Plan Calculation Date
--------------------------------------------------------------------------------------------------------------
AIM EQUITY FUNDS
AIM Blue Chip Fund Investor Shares 0.25 September 30, 2003
AIM Capital Development Fund Investor Shares 0.25 November 30, 2004
AIM Large Cap Basic Value Fund Investor Shares 0.25 September 30, 2003
AIM INTERNATIONAL MUTUAL FUNDS
INVESCO International Core Equity Fund Investor Shares 0.25 June 1, 2000
AIM SECTOR FUNDS
INVESCO Energy Fund Investor Shares 0.25 June 1, 2000
INVESCO Financial Services Fund Investor Shares 0.25 June 1, 2000
INVESCO Gold & Precious Metals Fund Investor Shares 0.25 June 1, 2000
INVESCO Health Sciences Fund Investor Shares 0.25 June 1, 2000
INVESCO Leisure Fund Investor Shares 0.25 June 1, 2000
INVESCO Utilities Fund Investor Shares 0.25 June 1, 2000
AIM STOCK FUNDS
INVESCO Mid-Cap Growth Fund 0.25 September 3, 2002
INVESCO S&P 500 Index Fund 0.25 June 1, 2000
|
[AIM INVESTMENTS LOGO] MASTER RELATED AGREEMENT TO
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(REIMBURSEMENT)
(INVESTOR CLASS SHARES)
This Master Related Agreement (the "Agreement") is entered into in accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") by each registered investment company, listed in Schedule A to this Agreement (each individually referred to as a "Fund", or collectively, "Funds"), severally, on behalf of each of the series of common stock or beneficial interest, as the case may be, set forth in Schedule A to this Agreement (each, a "Portfolio"), with respect to the Investor Class Shares of each such Portfolio listed on Schedule A. This Agreement, being made between A I M Distributors, Inc. ("Distributors") and each Fund, on behalf of each applicable Portfolio, defines the services to be provided by Distributors, or its designees, for which it is to receive its allocated share of expenses incurred pursuant to the Amended and Restated Master Distribution Plan (Investor Class Shares) (the "Plan") adopted by each of the Funds. The Plan has been approved by a majority of the directors/trustees ("Trustees") of each of the Funds, including a majority of the Trustees who have no direct or indirect financial interest in the operation of the Plan or this Agreement (the "Dis-Interested Trustees"), by votes cast in person at a meeting called for the purpose of voting on the Plan.
1. a. Distributors may use payments received pursuant to Paragraph 2 of this Agreement to provide continuing personal shareholder services to customers who may, from time to time, directly or beneficially own shares of the Funds. Continuing personal shareholder services may include but are not limited to, distributing sales literature to customers, answering routine customer inquiries regarding the Funds, assisting customers in changing dividend options, account designations and addresses, and in enrolling in any of several special investment plans offered in connection with the purchase of the Funds' shares, assisting customers in the establishment and maintenance of customer accounts and records and in the placement of purchase and redemption transactions, assisting customers in investing dividends and capital gains distributions automatically in shares, and providing such other services as the Funds or the customer may reasonably request and Distributors agrees to provide. Distributors will not be obligated to provide services which are provided by a transfer agent for a Fund with respect to a Portfolio.
b. Distributors may also use the payments received pursuant to Paragraph 2 of this Agreement for distribution-related services. As used in this Agreement, "distribution-related services" shall mean any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, organizing and conducting sales seminars, implementing advertising programs, engaging finders and paying finders fees, printing prospectuses and statements of additional information (and supplements thereto) and annual and semi-annual reports for other than existing shareholders, preparing and distributing advertising material and sales literature, making supplemental payments to dealers and other institutions as asset-based sales charges, and administering the Plan.
c. Distributors may provide the services described in paragraphs a. and
b. above either directly or through third parties (its "designees").
2. For the services provided by Distributors or its designees pursuant to this Agreement, each Fund, on behalf of a Portfolio, shall expend, on a monthly basis, and shall reimburse Distributors to such extent, for Distributors' actual direct expenditures incurred over a rolling twelve-month period (or the rolling twenty-four month period specified below) in engaging in the activities and providing the services specified in Sections 3 and 4 of the Plan, an amount computed at an annual rate of 0.25% of the average daily net assets of such Portfolio during the month as applied to the average net asset value of the shares of such Portfolio purchased or acquired through exchange on or after the Plan Calculation Date shown for such Portfolio on Schedule A. Distributors shall not be entitled hereunder to reimbursement for overhead expenses (overhead expenses defined as customary overhead not including the costs of Distributors' personnel whose primary responsibilities involve marketing of the Funds). Payments by a Fund on behalf of a Portfolio hereunder, for any month, may be made only with respect to: (a) expenditures incurred by Distributors during the rolling twelve-month period in which that month falls, or (b) to the extent permitted by applicable law, for any month during the first twenty-four months following a Portfolio's commencement of operations, expenditures incurred by Distributors during the rolling twenty-four month period in which that month falls, and any expenditures incurred in excess of the limitations described above are not reimbursable. No Fund on behalf of a Portfolio shall be authorized to expend, for any month, a greater amount out of its assets to reimburse Distributors for expenditures incurred during the rolling twenty-four month period referred to above than it would otherwise be authorized to expend out of its assets to reimburse Distributors for expenditures incurred during the rolling twelve-month period referred to above.
3. The total of the fees calculated for all of the Funds listed on Schedule A for any period with respect to which calculations are made shall be paid to Distributors within 10 days after the close of each month.
4. Distributors shall furnish the Funds with such information as shall reasonably be requested by the Trustees of the Funds with respect to the fees paid to Distributors pursuant to this Agreement.
5. Distributors shall furnish the Trustees of the Funds, for their review on a quarterly basis, a written report of the amounts expended under the Plan and the purposes for which such expenditures were made.
6. Distributors may enter into other similar Master Related Agreements with any other investment company without a Fund's consent.
7. This Agreement shall become effective immediately upon its approval by a majority of the Trustees of each of the Funds, including a majority of the Dis-Interested Trustees, by votes cast in person at a meeting called for the purpose of voting on the Plan and this Agreement.
8. This Agreement shall continue in full force and effect as long as the continuance of the Plan and this Agreement are approved at least annually by a vote of the Trustees,
including a majority of the Dis-Interested Trustees, cast in person at a meeting called for the purpose of voting thereon.
9. This Agreement may be terminated with respect to any Fund at any time without payment of any penalty by the vote of a majority of the Trustees of such Fund who are Dis-interested Trustees or by a vote of a majority of the Fund's outstanding shares, on sixty (60) days' written notice. It will be terminated by any act which terminates the Fund's Plan, and in any event, it shall terminate automatically in the event of its assignment as that term is defined in the 1940 Act.
10. This Agreement may be amended by mutual written agreement of the parties.
11. All communications should be sent to the address of each signor as shown at the bottom of this Agreement.
12. This Agreement shall be construed in accordance with the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: President
EFFECTIVE [DATE]. FUND (LISTED IN SCHEDULE A)
on behalf of the Investor Class Shares of each
Portfolio listed on Schedule A
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
|
SCHEDULE "A" TO
RELATED AGREEMENT
Fund Plan Calculation Date
------------------------------------------------------------------------------------------------------------------------------------
AIM COMBINATION STOCK & BOND FUNDS
INVESCO Core Equity Fund Investor Shares June 1, 2000
INVESCO Total Return Fund Investor Shares June 1, 2000
AIM EQUITY FUNDS
AIM Large Cap Growth Fund Investor Shares November 3, 2003
AIM INTERNATIONAL MUTUAL FUNDS
AIM European Growth Fund Investor Shares November 24, 2003
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund Investor Shares November 3, 2003
AIM Income Fund Investor Shares November 3, 2003
AIM Intermediate Government Fund Investor Shares November 24, 2003
AIM Municipal Bond Fund Investor Shares November 24, 2003
AIM Real Estate Fund Investor Shares November 3, 2003
AIM SECTOR FUNDS
INVESCO Technology Fund Investor Shares November 24, 2003
AIM STOCK FUNDS
INVESCO Dynamics Fund Investor Shares June 1, 2000
INVESCO Small Company Growth Fund Investor Shares June 1, 2000
|
FIFTH AMENDED AND RESTATED
MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS--Registered Trademark--
1. This Multiple Class Plan (the "Plan") adopted in accordance with Rule 18f-3 under the Act shall govern the terms and conditions under which the Funds may issue separate Classes of Shares representing interests in one or more Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the meanings ascribed to them below.
(a) Act - Investment Company Act of 1940, as amended.
(b) AIM Cash Reserve Shares - shall mean the AIM Cash Reserve Shares Class of AIM Money Market Fund, a Portfolio of AIM Investment Securities Funds.
(c) CDSC - contingent deferred sales charge.
(d) CDSC Period - the period of years following acquisition of Shares during which such Shares may be assessed a CDSC upon redemption.
(e) Class - a class of Shares of a Fund representing an interest in a Portfolio.
(f) Class A Shares - shall mean those Shares designated as Class A Shares in the Fund's organizing documents.
(g) Class A3 Shares - shall mean those Shares designated as Class A3 Shares in the Fund's organizing documents.
(h) Class B Shares - shall mean those Shares designated as Class B Shares in the Fund's organizing documents.
(i) Class C Shares - shall mean those Shares designated as Class C Shares in the Fund's organizing documents.
(j) Class K Shares - shall mean those Shares designated as Class K Shares in the Fund's organizing documents.
(k) Class R Shares - shall mean those Shares designated as Class R Shares in the Fund's organizing documents.
(l) Distribution Expenses - expenses incurred in activities which are primarily intended to result in the distribution and sale of Shares as authorized in a Plan of Distribution and/or agreements relating thereto.
(m) Distribution Fee - a fee paid by a Fund to the Distributor to compensate the Distributor for Distribution Expenses.
(n) Distributor - A I M Distributors, Inc. or Fund Management Company, as applicable.
(o) Fund - those investment companies advised by A I M Advisors, Inc. which have adopted this Plan.
(p) Institutional Class Shares - shall mean those Shares designated as Institutional Class Shares in the Fund's organizing documents and representing an interest in a Portfolio distributed by A I M Distributors, Inc. that are offered for sale to institutional customers as may be approved by the Trustees from time to time and as set forth in the Prospectus.
(q) Institutional Money Market Fund Shares - shall mean those Shares designated as Cash Management Class Shares, Institutional Class Shares, Personal Investment Class Shares, Private Investment Class Shares, Reserve Class Shares, Resource Class Shares and Sweep Class Shares in the Fund's organizing documents and representing an interest in a Portfolio distributed by Fund Management Company that are offered for sale to institutional customers as may be approved by the Trustees from time to time and as set forth in the Prospectus.
(r) Investor Class Shares - shall mean those Shares designated as Investor Class Shares in the Fund's organizing documents.
(s) Plan of Distribution - any plan adopted under Rule 12b-1 under the Act with respect to payment of a Distribution Fee and/or Service Fee.
(t) Portfolio - a series of the Shares of a Fund constituting a separate investment portfolio of the Fund.
(u) Prospectus - the then currently effective prospectus and statement of additional information of a Portfolio.
(v) Service Fee - a fee paid to financial intermediaries for the ongoing provision of personal services to Fund shareholders and/or the maintenance of shareholder accounts.
(w) Share - a share of common stock or beneficial interest in a Fund, as applicable.
(x) Trustees - the directors or trustees of a Fund.
3. Allocation of Income and Expenses.
(a) Distribution Fees and Service Fees - Each Class shall bear directly any and all Distribution Fees and/or Service Fees payable by such Class pursuant to a Plan of Distribution adopted by the Fund with respect to such Class.
(b) Transfer Agency and Shareholder Recordkeeping Fees
- Institutional Class Shares - The Institutional Class Shares
shall bear directly the transfer agency
fees and expenses and other shareholder recordkeeping fees and expenses incurred with respect to such Class.
(c) Transfer Agency and Shareholder Recordkeeping Fees - All Shares except Institutional Class Shares - Each Class of Shares, except Institutional Class Shares, shall bear proportionately the transfer agency fees and expenses and other shareholder recordkeeping fees and expenses incurred with respect to such Classes, based on the relative net assets attributable to each such Class.
(d) Allocation of Other Expenses - Each Class shall bear proportionately all other expenses incurred by a Portfolio based on the relative net assets attributable to each such Class.
(e) Allocation of Income, Gains and Losses - Except to the extent provided in the following sentence, each Portfolio will allocate income and realized and unrealized capital gains and losses to a Class based on the relative net assets of each Class. Notwithstanding the foregoing, each Portfolio that declares dividends on a daily basis will allocate income on the basis of settled Shares.
(f) Waiver of Fees and Reimbursement of Expenses - A Portfolio's adviser, underwriter or any other provider of services to the Portfolio may waive fees payable by, or reimburse expenses of, a Class, to the extent that such fees and expenses are payable, or have been paid, to such provider, and have been allocated solely to that Class as a Class expense. Such provider may also waive fees payable, or reimburse expenses paid, by all Classes in a Portfolio to the extent such fees and expenses have been allocated to such Classes in accordance with relative net assets.
4. Distribution and Servicing Arrangements. The distribution and servicing arrangements identified below will apply for the following Classes offered by a Fund with respect to a Portfolio. The provisions of the Prospectus describing the distribution and servicing arrangements are incorporated herein by this reference.
(a) AIM Cash Reserve Shares. AIM Cash Reserve Shares shall be (i) offered at net asset value, and (ii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(b) Class A Shares. Class A Shares shall be offered at net asset value plus a front-end sales charge as approved from time to time by the Trustees and set forth in the Prospectus, which sales charge may be reduced or eliminated for certain money market fund shares, for larger purchases, under a combined purchase privilege, under a right of accumulation, under a letter of intent or for certain categories of purchasers as permitted by Section 22(d) of the Act and as set forth in the Prospectus. Class A Shares that are not subject to a front-end sales charge as a result of the foregoing shall be subject to a CDSC for the CDSC Period set forth in Section 5(a) of this Plan if so provided in the Prospectus. The offering price of Shares subject to a front-end sales charge shall be computed in accordance with Rule 22c-1 and Section 22(d) of the Act and the rules and regulations thereunder. Class A Shares shall be subject to ongoing Service
Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(c) Class A3 Shares. Class A3 Shares shall be (i) offered at net asset value, and (ii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(d) Class B Shares. Class B Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(c), (iii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus, and (iv) converted to Class A Shares eight years from the end of the calendar month in which the shareholder's order to purchase was accepted, as set forth in the Prospectus.
Class B Shares of AIM Global Trends Fund acquired prior to June 1, 1998 which are continuously held in AIM Global Trends Fund shall convert to Class A Shares seven years from the end of the calendar month in which the shareholder's order to purchase was accepted, as set forth in the Prospectus.
Class B Shares of AIM Money Market Fund will convert to AIM Cash Reserve Shares of AIM Money Market Fund.
(e) Class C Shares. Class C Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(d), and (iii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(f) Class K Shares. Class K Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(e), and (iii) subject to on-going Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(g) Class R Shares. Class R Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(f), and (iii) subject to on-going Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(h) Institutional Class Shares. Institutional Class Shares shall be (i) offered at net asset value and (ii) offered only to certain categories of institutional customers as approved from time to time by the Trustees and as set forth in the Prospectus.
(i) Institutional Money Market Fund Shares. Institutional Money
Market Fund Shares shall be (i) offered at net asset value,
(ii) offered only to certain categories of institutional
customers as approved from time to time by the Trustees and as
set forth in the Prospectus, and (iii) may be subject to
ongoing Service Fees and/or Distribution Fees as approved from
time to time by the Trustees and set forth in the Prospectus.
(j) Investor Class Shares. Investor Class Shares shall be (i) offered at net asset value, (ii) offered only to certain categories of customers as approved from time
to time by the Trustees and as set forth in the Prospectus, and (iii) may be subject to ongoing Service Fees and/or Distribution Fees as approved from time to time by the Trustees and set forth in the Prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that do not incur a front-end sales charge, and of certain AIM Cash Reserve Shares, Class B Shares, Class C Shares and Class R Shares as follows:
(a) AIM Cash Reserve Shares. AIM Cash Reserve Shares acquired through exchange of Class A Shares of another Portfolio may be subject to a CDSC for the CDSC Period set forth in Section 5(b) of this Plan if so provided in the Prospectus.
(b) Class A Shares. The CDSC Period for Class A Shares shall be the period set forth in the Fund's Prospectus. The CDSC rate shall be as set forth in the Prospectus, the relevant portions of which are incorporated herein by this reference. No CDSC shall be imposed on Class A Shares unless so provided in a Prospectus.
(c) Class B Shares. The CDSC Period for the Class B Shares shall be six years. The CDSC rate for the Class B Shares shall be as set forth in the Prospectus, the relevant portions of which are incorporated herein by this reference.
(d) Class C Shares. The CDSC Period for the Class C Shares that are subject to a CDSC shall be one year. The CDSC rate for the Class C Shares that are subject to a CDSC shall be as set forth in the Prospectus, the relevant portions of which are incorporated herein by reference.
(e) Class K Shares. The CDSC Period for the Class K Shares that are subject to a CDSC shall be the period set forth in the Prospectus. The CDSC rate for the Class K Shares that are subject to a CDSC shall be as set forth in the Prospectus, the relevant portions of which are incorporated herein by reference.
(f) Class R Shares. The CDSC Period for the Class R Shares that are subject to a CDSC shall be the period set forth in the Prospectus. The CDSC rate for the Class R Shares that are subject to a CDSC shall be as set forth in the Prospectus, the relevant portions of which are incorporated herein by reference.
(g) Method of Calculation. The CDSC shall be assessed on an amount equal to the lesser of the then current market value or the cost of the Shares being redeemed. No CDSC shall be imposed on increases in the net asset value of the Shares being redeemed above the initial purchase price. No CDSC shall be assessed on Shares derived from reinvestment of dividends or capital gains distributions. The order in which Shares are to be redeemed when not all of such Shares would be subject to a CDSC shall be determined by the Distributor in accordance with the provisions of Rule 6c-10 under the Act.
(h) Waiver. The Distributor may in its discretion waive a CDSC otherwise due upon the redemption of Shares on terms disclosed in the Prospectus and, for the
Class A Shares and AIM Cash Reserve Shares, as allowed under Rule 6c-10 under the Act.
(i) CDSC Computation. The CDSC payable upon redemption of AIM Cash Reserve Shares, Class A Shares, Class B Shares, Class C Shares, and Class R Shares subject to a CDSC shall be computed in the manner described in the Prospectus.
6. Exchange Privileges. Exchanges of Shares, except for Institutional Money Market Fund Shares, shall be permitted between Funds as follows:
(a) Shares of a Portfolio generally may be exchanged for Shares of the same Class of another Portfolio or where so provided for in the Prospectus, another registered investment company distributed by A I M Distributors, Inc. subject to such exceptions and such terms and limitations as are disclosed in the Prospectus.
(b) Shares of a Portfolio generally may not be exchanged for Shares of a different Class of that Portfolio or another Portfolio or another registered investment company distributed by A I M Distributors, Inc. subject to such exceptions and such terms and limitations as are disclosed in the Prospectus.
(c) Depending upon the Portfolio from which and into which an exchange is being made and when the shares were purchased, shares being acquired in an exchange may be acquired at their offering price, at their net asset value or by paying the difference in sales charges, as disclosed in the Prospectus.
7. Service Fees and Distribution Fees. The Service Fee and Distribution Fee applicable to any Class shall be those set forth in the Prospectus, relevant portions of which are incorporated herein by this reference. All other terms and conditions with respect to Service Fees and Distribution Fees shall be governed by the Plan of Distribution adopted by the Fund with respect to such fees and Rule 12b-1 of the Act.
8. Conversion of Class B Shares.
(a) Shares Received upon Reinvestment of Dividends and Distributions - Shares purchased through the reinvestment of dividends and distributions paid on Shares subject to conversion shall be treated as if held in a separate sub-account. Each time any Shares in a Shareholder's account (other than Shares held in the sub-account) convert to Class A Shares, a proportionate number of Shares held in the sub-account shall also convert to Class A Shares.
(b) Conversions on Basis of Relative Net Asset Value - All conversions shall be effected on the basis of the relative net asset values of the two Classes without the imposition of any sales load or other charge.
(c) Amendments to Plan of Distribution for Class A Shares - If any amendment is proposed to the Plan of Distribution under which Service Fees and Distribution Fees are paid with respect to Class A Shares of a Fund that would increase materially the amount to be borne by those Class A Shares, then no Class B
Shares shall convert into Class A Shares of that Fund until the holders of Class B Shares of that Fund have also approved the proposed amendment. If the holders of such Class B Shares do not approve the proposed amendment, the Trustees of the Fund and the Distributor shall take such action as is necessary to ensure that the Class voting against the amendment shall convert into another Class identical in all material respects to Class A Shares of the Fund as constituted prior to the amendment.
9. Effective Date. This Plan shall not take effect until a majority of the Trustees of a Fund, including a majority of the Trustees who are not interested persons of the Fund, shall find that the Plan, as proposed and including the expense allocations, is in the best interests of each Class individually and the Fund as a whole.
10. Amendments. This Plan may not be amended to materially change the provisions of this Plan unless such amendment is approved in the manner specified in Section 9 above.
11. Administration of Plan. This Plan shall be administered in compliance with all applicable provisions of the Act and all applicable rules promulgated under the Act, including but not limited to Rule 18f-3, Rule 6c-10 (with respect to the imposition of CDSCs upon the redemption of Shares) and Rule 11a-3 (with respect to exchange privileges among Shares).
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, and as further amended and restated May 12, 2004.